Lord Acton of Bridgnorth

Richard Gerald Lord Acton, having been created Baron Acton of Bridgnorth, of Aldenham in the County of Shropshire, for life, took the oath.

Developing Countries: Debt Relief

Baroness Whitaker: asked Her Majesty's Government:
	Whether the improvements to the heavily indebted poor countries initiative for developing countries have produced the faster, wider and deeper debt relief which was intended.

Baroness Amos: My Lords, five countries have qualified for relief under the enhanced heavily indebted poor countries initiative. That is disappointing because the target was for 11 countries to have qualified by the spring meetings of the World Bank and the IMF, which are taking place now in Washington. We are pressing the bank and fund to speed up the process.

Baroness Whitaker: My Lords, I thank my noble friend for that Answer, which is rather discouraging. In view of the crucial importance of the initiative, will she say whether all 25 of the countries targeted to have met the goal by the end of the year will have done so?

Baroness Amos: My Lords, I agree with my noble friend that the situation is somewhat disappointing. However, we must remember that the improvements to the HIPC process were agreed only in September last year. We set ourselves a number of ambitious targets. We remain committed to those targets. In particular, we welcome the IMF committee's agreement yesterday in Washington to establish a joint World Bank/IMF implementation committee to oversee implementation of the HIPC initiative. We hope that we shall achieve our target by the end of the year.

Baroness Rawlings: My Lords, I accept the importance of debt relief and that those funds were granted by well-informed, trained people, but will the Minister tell the House what Her Majesty's Government are doing to persuade the governments concerned not to spend the debt savings on defence and private whims, but instead to ensure more responsibility and more transparency in government to minimise corruption? Are the Government supporting the IMF's decision regarding Uganda?

Baroness Amos: My Lords, the IMF has not yet made a decision in relation to Uganda. As I understand it, concerns were expressed about an element of spending by Uganda, which has been entirely transparent. It is an element that was predicted by Uganda. The IMF is considering it.
	With respect to the noble Baroness's other questions, the HIPC 2 initiative is linked clearly to developing countries producing poverty reduction strategies which will ensure that debt relief is then spent on matters such as education and health. As part of that process, those countries are expected to consult with civil society organisations, with the international financial institutions themselves and with donor countries. There is transparency and there is clearly a commitment to cutting down on corruption.

Viscount Waverley: My Lords, once resolved, what measures will be put into place to protect against such forms of indebtedness arising again, including due recognition of disaster periods?

Baroness Amos: My Lords, of course we want to ensure that countries do not get into debt in the first place. That is why the kind of review currently taking place, such as the export credit guarantee scheme, for example, is important. I have already mentioned in my reply to the noble Baroness, Lady Rawlings, that the international financial institutions are tying debt relief to poverty reduction strategies. The IMF will tie poverty reduction and growth facility lending to poverty reduction strategies. We must, of course, try to ensure that developing countries achieve economically so that they can come out of debt in the first place.

Lord Rea: My Lords, can my noble friend say whether it is too early to see any increase in social spending in the countries affected by the HIPC initiative, which she has said that the initiative ensures? If that is not visible already, can she speculate as to when we are likely to see such an increase?

Baroness Amos: My Lords, the rationale of debt relief is to allow countries to make progress on poverty. It is too soon to see any impact on poverty in the countries that have taken part so far. However, the effect on poverty spending so far has been encouraging. Uganda, for example, put the debt relief into a poverty action fund, which has given the debt/poverty link a local political importance. So far that fund has allocated money to primary education. Before the floods, Mozambique had made important progress on health spending and Guyana, which has had some social unrest, has increased its social spending above the target. While it is too soon to see the detail of the change, we can see some evidence of it already.

Lord Skelmersdale: My Lords, many of these countries suffer from a lack of water. One of the most important things that can be done by the international community is to ensure that water retention schemes are carried out and that wells are dug in those countries. Does that matter fall within the category of the Question?

Baroness Amos: My Lords, it is important to remember that debt relief is not the only mechanism that we are using to assist developing countries in respect of their long-term sustainable development. It is one part of the process. In terms of our own development assistance to countries, we have now taken what is called a sector-wide approach by which we shall agree with the government of each country the areas in which we shall work. In a number of countries water and sanitation are key priorities and we lead in those sectors. I agree with the noble Lord that that is important in terms of the long-term, sustainable development of a number of developing countries.

The Earl of Sandwich: My Lords, can the Minister say whether the Government, in the form of the Chancellor, could lodge a complaint with the IMF about the case of Uganda? No developing country has done more to put poverty alleviation strategies in place. If Uganda cannot make it work, none of the other countries will follow.

Baroness Amos: My Lords, we believe that Uganda has produced an excellent poverty reduction strategy. It has been entirely transparent about its proposed spending. I understand that the discussion with the IMF relates to the purchase of a jet and we shall have the result of that discussion as soon as possible. We shall continue to press the IMF to make a decision as quickly as possible.

HM Prison Rochester

Lord Avebury: asked Her Majesty's Government:
	What action they propose to take on the report of the Chief Inspector of Prisons on HM Prison Rochester.

Lord Bach: My Lords, we welcome this report which highlighted a number of weaknesses in conditions for prisoners and detainees at Rochester.
	An action plan addressing the 132 recommendations made in the report was produced within 30 working days of publication. Sixty-five of the recommendations have already been implemented, 55 are in the course of implementation and the rest are still being considered. We expect the Prison Service to respond to the report formally in three to four weeks.

Lord Avebury: My Lords, I thank the Minister for that reply. First, can he explain why the Prison Service has repeatedly ignored the recommendation of the chief inspector not to leave prisons without governing governors for months on end? In this case it was six months. As the chief inspector points out, such a situation almost invariably leads to problems.
	Secondly, can the Minister say what has been done about the recommendation--again repeatedly made by the chief inspector--to have a senior official at Prison Service headquarters responsible for the treatment and management of foreign prisoners, whether they be in detention centres or prisons? If the Government do not accept that recommendation, what other means do they plan to adopt to ensure that the special needs of foreign prisoners are met?

Lord Bach: My Lords, the difficulties caused by leaving an establishment without a governing governor are recognised. The Prison Service must make the best possible use of the skilled managers in the service. The movement of senior governors is directed by the deputy director-general in discussion with the relevant area managers, based on their expert judgment of the greatest need.
	As has been stated recently in the House, the director-general has said that at diverse and complex prisons there will be no gap at governor one level. Efforts are being made to keep any other gaps at other prisons to a minimum, but it is not possible to eliminate those entirely. Therefore, for as short a time as possible, it will be necessary to fall back on the deputy governor who will cover a role that he normally undertakes and that he is qualified to carry out. Rochester falls into that category, but I and the Prison Service recognise and accept that it was unsatisfactory for Rochester to be left without a governing governor for as long as six months.
	The answer to the noble Lord's second question is "no". It would be impractical. We believe that it is best to manage the service on a geographical basis, aligned to government regions.

Lord Quirk: My Lords, is it not a matter for dismay and alarm that the report finds the education provision at Rochester to be in so desperate a state? Fewer than half of those enrolled in classes attend them; evening courses have been suspended; there are no functioning workshops; there are bad relations between the Prison Service and the education service; and poor management of the education service. As regards education in prisons, will the Government take urgent action not only in Rochester but throughout the service?

Lord Bach: My Lords, at the time of the inspection, there were weaknesses. However, I am happy to be able to tell the House that there have been significant improvements since then; for example, in November last year 98.5 per cent of the contracted hours were delivered. Improvements to the regime at Rochester were already in hand prior to the visit of the chief inspector, with the allocation of £465,000 of funding over the three-year period specifically to develop the provision of education and offending behaviour programmes.

The Lord Bishop of Rochester: My Lords, in view of the chief inspector's recommendation that there should be an urgent review of the conditions in the prison at Rochester and his call for a clear and coherent set of guidelines for the treatment of detainees, together with the need to take the variety of cultures seriously--for example, in the training of prison staff and in terms of staff from the Immigration Service--will the Minister acknowledge the excellent work being carried out by the ecumenical chaplaincy, which, incidentally, was not mentioned in the report, and pledge all the necessary resources for the continuance and strengthening of this important work?

Lord Bach: My Lords, I am happy to do so. I am very grateful to the right reverend Prelate, who represents with such distinction the area within which the prison is located, for asking me a question this afternoon. The answer to his question is, unreservedly, "yes".

Lord Allen of Abbeydale: My Lords, can the Minister say whether there is any truth in the press report that the Government are proposing to abolish the post of Chief Inspector of Prisons?

Lord Bach: My Lords, there is no truth in that report. However, if the noble Lord will be patient with me, I shall have more to say in that respect on Thursday when I believe that I shall be answering a Question for one of my noble friends on this very subject.

Lord Ackner: My Lords, is the noble Lord aware that one of the chief concerns mentioned in this report was the poor treatment and conditions experienced by numbers of asylum seekers, immigration detainees and other foreign nationals? Does the Minister propose to do anything about the recommendation that someone should be identified by the Prison Service within its headquarters and given specific responsibility for the treatment and conditions of foreign nationals?

Lord Bach: My Lords, as I hope I indicated in my earlier reply to the noble Lord, Lord Avebury, given the small numbers held in various establishments, which also have other functions, it would be impractical for someone at the head office of the Prison Service to have overall responsibility for the treatment and conditions of foreign nationals.
	The most recent consultation exercise on the management structure of the service produced widespread support for continuing to manage the service on a geographical basis. Only the high security and female estates are managed functionally. The move to dedicated centres for immigration detainees, which is the Government's policy, will reduce the number of prisons which hold small numbers of them alongside other prisoners.

Lord Pearson of Rannoch: My Lords, can the noble Lord tell the House of any progress that the Government are making to ensure that fewer people who are mentally ill, mentally handicapped and mentally disturbed are kept in prison when they could perhaps be more happily accommodated elsewhere?

Lord Bach: My Lords, a task force is at present looking into exactly that difficult and important issue. I look forward to being able to report back to the House in due course.

Lord Carlisle of Bucklow: My Lords, can the Minister say whether it is still the view of the Government that prison works?

Lord Bach: My Lords, of course prison works; but it works better for some than for others.

West Coast Main Line

Baroness Thomas of Walliswood: asked Her Majesty's Government:
	Whether, in the light of reported delays in the modernisation of the West Coast Main Line, they will call together the parties involved to agree a programme for timely completion of the project.

Lord Macdonald of Tradeston: My Lords, a group consisting of officials from the shadow Strategic Rail Authority (sSRA), the Office of the Rail Regulator, Railtrack and the train operators involved in the West Coast Main Line, both passenger and freight, has been established and meets regularly. The sSRA reports to Ministers as necessary. Railtrack has said that it is on course to meet its contractual commitments to Virgin in 2002 and 2005. The Rail Regulator has published a draft final order that he proposes to make. This would require Railtrack to produce robust plans which demonstrate that it can meet those commitments and that it can meet the reasonable requirements of other train operators and funders, including the shadow Strategic Rail Authority.

Baroness Thomas of Walliswood: My Lords, I thank the Minister for that reply. I am glad to hear that this co-operative group, albeit at a fairly low level, is in operation. However, is not the Minister concerned that this project is running so dangerously near to being very late that the Rail Regulator has already issued threats of possible action for default? Is not the noble Lord also concerned that there is still doubt as to whether or not sufficient capacity will be provided for freight and for the slow passenger lines that must continue to use the West Coast Main Line? Further, should this work ever start, does the noble Lord know--indeed, does anyone know--Railtrack's plans for coping with the work and minimising the disruption to the rest of the rail network during the process?

Lord Macdonald of Tradeston: My Lords, the regulator has sought and obtained enforceable undertakings from Railtrack to provide additional capacity for train operators, other than West Coast Trains Limited, on completion of the next stage--namely, to carry out strategic reviews of the scope for further capacity on the route. In November 1999, using his powers under the Railways Act, the regulator initiated enforcement action against Railtrack to require it to produce credible plans that demonstrate that it can complete the project successfully.
	At present, Railtrack has refused to consent to the enforcement action. Without the consent of Railtrack to the changes, the regulator is required to go through a statutory consultation period. When that period closes on 25th April--this month--the regulator will decide whether to confirm, modify or withdraw the order in the light of representations received. However, the Rail Regulator and the sSRA have been in regular discussion about the enforcement action. The sSRA supports the approach that the regulator is taking. Railtrack's undertakings made to the regulator in April 1998 provided that it would carry out the necessary actions to ensure that the line is completed. We are assured that it will be completed on time in its first stage in 2002, and in its later stage in 2005.

Lord Faulkner of Worcester: My Lords, I have a question for my noble friend the Minister about the recent report of the National Audit Office on the Rail Regulator. Does not my noble friend agree that that report reveals how wholly unsatisfactory and inadequate the process of regulation of the railway was until the appointment of the present incumbent, Mr Tom Winsor? Further, can my noble friend also confirm that it is right that the regulator should insist that Railtrack honours its licence commitment to put the public interest ahead of that of its shareholders, and that there must be no slippage on the West Coast Main Line upgrade?

Lord Macdonald of Tradeston: My Lords, I agree with my noble friend. The present regulator, Tom Winsor, took up his post in July 1999. He is currently engaged in a review which will make the final decisions later this year about the level of access charges to be paid during the period from April 2001 to 2006.
	My noble friend referred to the report of the National Audit Office which said that the regulator found it difficult to establish whether Railtrack has carried out enough maintenance and renewal and that was partly because the regulator did not agree clearly enough at the outset in 1993 what standards Railtrack was supposed to meet. Therefore, the Rail Regulator has not been able to monitor the condition of Railtrack's assets, and information given to the regulator has not been independently verified. The Government echo the Comptroller and Auditor General of the NAO, who said that he welcomed the action by Mr Winsor. The Government also welcome the rigour that Mr Winsor is bringing to the role of regulator.

Lord Tomlinson: My Lords, if the West Coast Main Line is a top priority--I believe it is the unanimous view of industry and commerce in the West Midlands that it should be and that it should, therefore, be completed and completed on time--does my noble friend the Minister agree that it is imperative that the Government do not become a victim of their own success in attracting passengers on to the railways? What kind of assurance can my noble friend give me that the industry will have the capacity to cope with rising demand that will come from the completion of this modernisation; for example, are enough vehicles being built and old ones scrapped?

Lord Macdonald of Tradeston: My Lords, there has been an increase of 15 per cent in rail passenger journeys since May 1997. Train operators, however, are running 1,100 more trains a day to meet that increased demand. There has been a 15 per cent increase in freight moved by rail since May 1997. However, I am delighted to say that private sector rail investment has increased by 34 per cent in the past two years and now stands at £1.7 billion. Much of that sum has been invested by Railtrack. The main vehicle for promoting increased rail investment will be the franchise replacement programme currently being undertaken by the shadow Strategic Rail Authority.
	At this stage we cannot agree any particular figures for future investment. I believe that the precise amounts needed will be illuminated by the sSRA's and the rail regulator's views on the Railtrack 2000 Network Management Statement, which was published at the end of last month. I agree with my noble friend that we must ensure that modernisation is accelerated to cope with the increased demand and growth. I am delighted to say that in the next couple of months over 200 new vehicles will be "rolling" on our railways.

Lord Roberts of Conwy: My Lords, the Minister has given us the completion dates, but is there a firm starting date for the modernisation programme?

Lord Macdonald of Tradeston: My Lords, the modernisation programme is already under way. We are considering upgrades due for completion by the year 2002 on line speeds south of Crewe, which will be taken up to 125 miles per hour. The second stage, which is to be completed in the year 2005, will take speeds up to 140 miles per hour. Some concern has been expressed about the viability of the project because of the huge sums involved. The original figure of £2.4 billion has been increased to an estimate of £5.8 billion by Railtrack. That higher figure is being scrutinised by the regulator at the moment but we are confident--Railtrack has assured us that that is the case--that work is under way and that we can look forward to quicker journey times on the West Coast Main Line in future.

British Coal Pension Fund: Surpluses

Lord Dormand of Easington: asked Her Majesty's Government:
	Whether they will reduce their annual claim on the British Coal pension fund in order to increase the payments made to claimants who are former miners.

Lord McIntosh of Haringey: My Lords, since 1994 the Government have acted as guarantor to the former British Coal pension schemes. In return the Government receive 50 per cent of any actuarial scheme surpluses; the remaining 50 per cent being available to the scheme trustees for distribution among their membership. While the Government do not mean to re-open the guarantee arrangements, they are discussing with the trustees whether there are opportunities to build upon them to the mutual benefit of scheme members and government.

Lord Dormand of Easington: My Lords, does my noble friend recall that when a Starred Question was asked on this subject on 14th February this year, the noble Lord, Lord Sainsbury, said that, since 1994, £519 million has been received since the 50 per cent scheme came into operation? Is the noble Lord aware that the trustees have said recently that they expect to receive a minimum of £250 million per annum for a number of years ahead? They have also said that there is a reserve fund of £4 billion from which these payments will be made. Given those facts, does not my noble friend agree that for the foreseeable future there is no possibility of a deficit arising in the fund, and that the time is now opportune for the Government to reduce their 50 per cent take? I remind my noble friend that most retired miners now receive only £38 a week pension.

Lord McIntosh of Haringey: My Lords, I confirm the figures that my noble friend Lord Sainsbury gave in February of this year. However, my noble friend Lord Dormand will recall that Her Majesty's Government have paid £400 million to the trustees since 1995 for what is allowed to be used as related expenditure; that is, the surpluses have been allowed to be ring fenced and used to offset expenditure on liabilities inherited from British Coal, such as coal health liabilities, respiratory conditions, vibration, white finger and so on. My noble friend will also be aware of the £354 million which has been committed to coalfield areas over a period of three years since 1998.

Lord Ezra: My Lords, is the noble Lord aware that I tabled the Starred Question on 14th February to which the noble Lord, Lord Sainsbury, replied and to which the noble Lord, Lord Dormand, referred, and that I thought that I obtained a fairly sympathetic response to the fact that the Government--as the noble Lord, Lord Dormand, has pointed out--have obtained out of their share of the coal pension fund a vastly greater amount than was previously expected? In view of that, will the noble Lord, together with his noble friend, try to do something which has never been done before in history; namely, attempt to locate the heart of the Treasury, appeal to that organ, if they can find it, and make sure, as the noble Lord, Lord Dormand, also urged, that more of this money should be dedicated to benefit ex-mine workers in poor circumstances?

Lord McIntosh of Haringey: My Lords, I am as sympathetic to this matter as my noble friend Lord Sainsbury. I said in my first Answer that we are discussing with the trustees whether there are opportunities to build upon the guarantee arrangements to the mutual benefit of scheme members and government. The reduction in risk of the scheme, which I acknowledge and which was mentioned by the noble Lord, Lord Dormand, may make it possible, for example, for the trustees to adopt a more aggressive investment policy which would produce higher returns to the benefit of everyone.

Lord Marsh: My Lords, are provisions such as the Minister has outlined available to the other former nationalised industries' pension funds, and, if not, why not? I declare an interest.

Lord McIntosh of Haringey: My Lords, I believe that that is a general rather than a specific interest. I know that the noble Lord is a pensioner! The scheme which we are discussing today was set up under the Coal Industry Act 1994. Different arrangements arise from different privatisation legislation of the previous government.

Lord Eden of Winton: My Lords, has the Minister made any assessment of the numbers of former miners who might be claimants, which would give some indication to the House of the scale of the provision that might arise?

Lord McIntosh of Haringey: My Lords, I do not have an assessment of the number of miners, but certainly the trustees have made assessments of the cost of various options which might be open to them--for example, the cost which might arise if former miners were to be given pensions at the age of 50, or if coal board staff were to be given pensions at the age of 50. The former case would involve costs of the order of £1.4 billion. I understand that at the present time the trustees are not able to meet that cost. However, different ways of improving the pension provision would involve significant and varying costs.

Child Support, Pensions and Social Security Bill

Baroness Hollis of Heigham: My Lords, I beg to move that this Bill be now read a second time.
	The Bill introduces reform in three key areas. First, it supports the Government's commitment to eradicating child poverty in a generation by radically reforming child support. Secondly, it introduces the second stage of our pensions reforms. Thirdly, it strengthens the link between the benefits people get and their responsibilities to society, with new action to encourage compliance with community sentences. These reforms build on those we have made since the election--reforms that promote opportunity, reduce people's need to rely on benefits and produce greater security in old age.
	Part I of the Bill sets out our reforms of the child support system. There is, I believe, widespread agreement in this House that the primary responsibility for the support of children lies with parents--and that means both parents, whether they live together or apart. The challenge for government is to ensure that where the parents do live apart, there is an effective system of child support in place.
	The failings of the current system are well documented. Parents are left angry and confused by a formula of Byzantine complexity. It can take months before a decision is made, and the agency spends 90 per cent of its time chasing information and only 10 per cent chasing up missing payments. The result, not surprisingly, is a system that fails children. Of the 1½ million children on the agency's books, only 300,000 gain from maintenance paid, and only 100,000 of that 1½ million see all the money that is due to them.
	Currently, the CSA faces an impossible task. It is required to administer a hugely complex formula that parents do not understand; parents with care go for months without seeing any maintenance; and because of the delays, non-resident parents--usually fathers--start with huge unanticipated debts and, faced with a cliff to climb, understandably some of them choose not to start. The income support of parents with care is reduced pound for pound, so parents see the purpose of the CSA as reducing benefit expenditure--Treasury support--rather than providing meaningful support for their children. To the mothers, the CSA represents all hassle and no cash--hardly a system that encourages co-operation and involvement from parents.
	Going back to the courts is not the answer. The failure of the courts to deliver a fair system led to the introduction of the child support scheme in the first place. That is why we, as the then opposition, backed the previous government's introduction of an agency. But, in their efforts to make the agency acceptable, they made the system too complex to understand and too difficult to administer. We are determined to remove the obstacles in the current scheme and to give the CSA the extra powers it needs to deal with parents who continue to seek to avoid their responsibilities.
	Our first objective is to address the complexity inherent in the current scheme. The Bill introduces a much simpler system that is easy for parents to understand and for the CSA to administer. Non-resident parents will pay a flat-rate percentage of their net income (after tax, national insurance and pensions contributions) of 15 per cent for one child, 20 per cent for two, and 25 per cent if they have three or more children. There will be ready-reckoner booklets containing that information--the income at the top; the number of children at the side--available in post offices and libraries. So, even for a couple who have broken up, he will know--it is usually "he"--what maintenance he may be expected to pay, and he can make arrangements for it. This approach will mean that decisions can be made in days rather than in months, getting the money flowing faster.
	Our second objective is to ensure that children see the benefit of the maintenance paid. Currently, families on income support get no benefit from the payment of maintenance. Under the Bill, in future, if he is on benefit and she is on benefit, the £5 that he currently sends over to the Treasury, of which she sees not a penny, will in future go to her and her child for support. If he is in work and she is on benefit, the first £10 of maintenance will stay with her. If the mother goes into work and receives working families' tax credit, she will keep every penny of the maintenance paid--another £30 or £40 a week extra money available for child support.
	We believe that this will provide a major incentive for parents to co-operate in the assessment and collection of maintenance. It will ensure that extra help goes to the poorest families and to the poorest children.
	Our third objective in reforming the CSA is to provide it with the teeth that it needs to ensure that parents cannot avoid their responsibilities. Currently, 30 per cent of parents pay nothing towards the upkeep of their children. Reform of the formula and the benefit system provides incentives for parents to co-operate. The simpler system will mean that the CSA has more time to spend on ensuring that effective payment arrangements are in place.
	We are also taking new powers to tackle those who continue to try to avoid their responsibilities. Parents who misrepresent or withhold information from the CSA will face fines of up to £1,000. The agency will also have new powers to appoint new specialist inspectors, allowing it to gather information more quickly and effectively than now. Parents who deliberately delay paying money for their children will face a new penalty of up to 25 per cent of the money due. Persistent non-payers could, as now, still face gaol but, in addition, the courts will be given the power to take away their driving licence.
	Parents will have every reason to co-operate in the assessment and collection of maintenance for their children under the new and simple system, with the direct benefit going to the children. But if they do not, the CSA will have new powers to hold them to account. We want compliance--that benefits children--but if we do not get it, enforcement will kick in.
	We are also closing a loophole that allows some fathers to delay an assessment of their liability by denying paternity. We intend to extend nationally the existing arrangements for Scotland. In future, if a child was born while the father was married to the mother, if he is named on the birth certificate or if he refuses to take a DNA test, the burden will be on him to prove that he is not the father.
	These reforms pave the way for a radically improved service from the CSA, but we must avoid the failures of the current system which may be caused by introducing the reforms too quickly. The new scheme requires significant changes in the way that the agency works, including new IT systems. It is crucially important that we get the reforms right from day one if we are to build parents' confidence.
	To ensure that the new system beds in properly, we shall introduce the new measures for new cases first so that we can get it up and running with a manageable take-on of cases. We expect this stage of the reform to be introduced by April 2002. Existing cases will be transferred at a later date, once we are sure that the new system is working well.
	So, to complete my remarks in regard to this part of the Bill, we all agree, I hope, that the current system has failed parents and children alike. This Bill will put that right. The new system will be simple; it will cut out the complexity, bureaucracy and delay that have undermined the existing arrangements. This will allow parents to understand what they can expect; it will get maintenance flowing quickly; and it will allow the agency to spend more time on ensuring that maintenance is paid and less time on chasing paper.
	The new system will be fair. It will be fair for parents with care, who will get regular and reliable maintenance for their children more quickly. Obviously, reliability is as important as even the sum of money collected. It will be fair, too, for non-resident parents, who will know quickly what they should pay; they will understand how it has been calculated--they will be able to do the calculations themselves effectively--and they will see the maintenance that they pay directly benefit their children. But, most importantly--at the end of the day, this is what matters--it will be fair to children, who will have access to the support that they need. By helping parents who want to support their children and by cracking down on those who do not and will not, a total of more than 1 million children will see the benefit of maintenance for the first time--600,000 of those in the poorest families in our land.
	Part II of the Bill deals with our reform of pensions.

Lord Stoddart of Swindon: My Lords, before the Minister goes on to Part II, can she explain why the Government are introducing the penalty of withdrawal of a driving licence from absent parents who do not pay maintenance? The object of a driving licence is to ensure that people who drive have passed a relevant test. In my view--in many people's view, I should have thought--the withdrawal of a licence should not be used as a penalty for non-payment of this kind of maintenance or any other. Can the Minister explain? Will this carry on and be applied to all kinds of other crimes or misdemeanours?

Baroness Hollis of Heigham: My Lords, I cannot predict whether it will or will not apply to other kinds of crimes and misdemeanours, to quote my noble friend. We are seeking to introduce this provision at the moment because fathers who can and should pay maintenance are not doing so. For many of them, a gaol sentence is perhaps too heavy; and some of the other penalties--for example, restraint of goods or garnishee orders on their estates--take a very long time to kick in.
	We have looked at the experience of other countries. The latest statistics that I have seen show that in 1996 in the state of Texas some 17 or so licences were impounded--those figures may now have increased--but something like 26 million dollars extra flowed to children. In other words, it was not the taking away of licences that got the money flowing to children; it was the threat of taking away the driving licences that got the money flowing to children. That is what we want to ensure. If we have had real difficulty in some cases in getting a father who can pay to face up to his responsibilities, at the end of the day if the threat of removal of a driving licence ensures that he addresses his responsibilities for the first time, I am confident that I shall have the support of my noble friend.
	I move to Part II of the Bill which deals with our reform of pensions. If we do nothing, one in three persons will be dependent on means-tested benefit in retirement by 2050. Our pension strategy will put pensions on a sound, sustainable and affordable footing for the future. Everyone who can save for retirement should do so, but not all have that opportunity. Last summer we legislated for stakeholder pension schemes to provide 5 million moderate earners without access to an occupational scheme with a suitable savings vehicle, through a funded pension scheme.
	The reforms in this Bill go further. The measures in the Bill will help 4.5 million low-paid earners, 2 million carers and 2 million long-term disabled people with broken work records. These groups have the least opportunity to save for retirement. Generally speaking, they do not have sufficient earnings to make saving via a personal pension worth while. The state earnings-related pension scheme does not do much for them either because it is earnings related. So, if one does not earn very much, one does not get very much when one retires. Too many people now are headed for a life on low income in old age because they are unable to build up a decent second pension. Women are especially disadvantaged.
	We are providing the extra help that these groups need by reforming SERPS through the introduction of the state second pension. For some people, this will quadruple the amount of additional pension to which they will be entitled. For example, under SERPS, someone earning the equivalent of £6,000 a year over a working life will get £14 a week on top of their basic state pension. Under the state second pension, it will be £54 a week--four times as much. That is a major shift in resources to those earning less than £9,500, to those with interrupted careers, those who have disabilities or who have been carers.
	This extra help will be provided by changing the way in which the additional pension is calculated. First, everyone earning above the lower earnings limit but less than £9,500 in any year will be treated as if they had earned £9,500 for the purposes of calculating their additional pension. If they were earning £4,000 or £6,000 or £8,000, their state second pension would be calculated as though they were earning £9,500. That is why this reform is so redistributive towards those who are less well off. Secondly, the rate at which the additional pension accrues on this £9,500 will double to 40 per cent. This higher accrual rate will apply to earnings up to £9,500 for all earners. To ensure that the extra help is targeted on lower earnings, the extra benefits of the state second pension will taper away on earnings between £9,500 and £21,000, with someone earning in excess of £21,600 receiving exactly what they do now under SERPS.
	Low earners--those earning under £9,500--gain the most: someone earning £6,000 will see their additional pension go up 400 per cent. Moderate earners gain on a sliding scale. The position of high earners is unchanged. Low and moderate earners on contracted-out pension schemes will also benefit from this extra help through a combination of national insurance rebates and state second pension top-up payments.
	For the first time, carers and long-term disabled people with broken work records will receive help to build an additional pension. The state second pension will treat them as if they had earned £9,500 in each relevant year. That adds up to about £1 a week in extra pension for each qualifying year. For a couple retiring in 25 years' time, one of whom spent a lifetime working for low earnings while the other spent years caring, the state second pension will give them nearly £30 a week more on their pension. They will stay clear of the minimum income guarantee for 15 years after that.
	The second stage of the state second pension will be a flat-rate scheme. It will be introduced when stakeholder pensions have become established and will apply only to those who have a significant part of their working life remaining. In stage two, everyone will be treated as if they had earnings of £9,500. This will provide a strong incentive for moderate and higher earners to contract out as rebates will remain earnings related. This reflects our policy of encouraging those who can to provide for their own retirement.
	To conclude on this section, the state second pension is the next stage of the Government's strategy for pensions. The stakeholder pensions introduced in last year's Bill will ensure that all those able to save for their retirement have access to a suitable, funded, safe, secure, portable and transparent pension. Under this Bill, the state second pension will ensure that those least able to survive can also build a decent income in retirement. The minimum income guarantee, winter fuel payments and free TV licences are among a range of measures designed to provide the extra support that today's pensioners need now. These reforms will achieve our goal of shifting the balance from 60 per cent state pension provision/40 per cent funded provision to the reverse: 60 per cent funded/40 per cent state pension provision.
	Part III of the Bill includes our proposals relating to community punishments. Every year about one in four offenders who are given community sentences--of the 130,000 or so in all--are brought before the courts for failing to comply. Failure to comply with the terms of a community sentence demonstrates an offender's unwillingness to make reparation for the offences committed; yet many of these offenders continue to claim benefits from society as a right. They are prepared to meet the conditions of entitlement to benefit when there is something they want from the state; they are not prepared to meet the conditions of their community sentence when the state requires something from them.
	We intend to extend the conditions for receiving benefits to link benefit payment to compliance with a community sentence. We shall pilot this in a small number of areas to evaluate the effects on offenders' behaviour and to test operational arrangements before extending the proposals across the country. In the pilot schemes, we propose to withdraw or reduce jobseeker's allowance, income support and training allowances for four weeks for offenders who are referred back to court by the Probation Service for breaching their community sentence. The courts and the Probation Service will warn offenders at the outset that they will lose benefit if they do not comply; offenders will be warned again after one unacceptable failure to attend. This will send a clear message to offenders that rights have to be matched by responsibilities. There will be no sanction imposed if those responsibilities are taken seriously and offenders comply with the terms of their sentence.
	Finally, the Bill contains further measures, including reform of the system of appeals for war pensions covering provision about appointments to pensions appeal tribunals. Those appointments, and appointments to other tribunals referred to in this Bill--unified appeal tribunals for housing benefit and council tax benefit, other social security matters and child support, the Pensions Ombudsman and OPRA--are included in the arrangements regarding tenure of office which my noble and learned friend the Lord Chancellor announced last Wednesday.
	The Bill also reforms the rules governing occupational and personal pensions to support the Government's aim of encouraging employers to provide pension schemes and employees to join them, so it strengthens the role of trustees.
	We promised to reform the welfare state. This Bill contains a radical package of measures that provide the next step in building a welfare state fit for the 21st century, founded on fairness and opportunity. It is fair to children who miss out under the current system of child support and are therefore, as the children of lone parents, among the poorest in our land. More than 1 million children will get a fair deal from the child support measures in the Bill. It is the children who matter. The Bill is fair to the low paid, carers and long-term disabled people with broken work records, who now miss out on a decent second pension. The state second pension will provide a decent income in retirement for more than 18 million people. The Bill is also fair to those who are prepared to meet their responsibilities to society, by demanding better conduct from those who do not. With pleasure, I commend the Bill to the House.
	Moved, That the Bill be now read a second time.--(Baroness Hollis of Heigham.)

Lord Higgins: My Lords, as is often the case on social security Bills, I must immediately declare an interest as a chairman and trustee of an occupational pension scheme.
	Last year the social security Bill which came before us was effectively five Bills in one. The Bill now before us is really at least three Bills in one. One might regard that as progress but I do not think that that is the case. It is quite wrong for Bills to be produced covering a variety of subjects where there is little if any relationship between one part and another. For example, the link between the child support provisions and the pensions provisions, apart from the fact that they are dealt with by the same department, is virtually non-existent. Therefore, we shall have a heavy load of work ahead of us if we are to give the Bill the scrutiny which it deserves.
	As the noble Baroness pointed out, the first part of the Bill is concerned with the Child Support Agency and its reform. Anyone who, like me, served in the previous Parliament cannot do other than believe that there is need for reform. I spent an unbelievable amount of time on individual cases and frequently dealt with people who showed a degree of bitterness which I found surprising. I refer in particular to the wives in the second family who were determined not to have any money pass from the second family back to the children of the first marriage. That degree of bitterness created difficult situations. Just when one thought that the whole matter was on an even keel, that the case would be solved and progress would be made, the agency made a mistake which put back the whole matter to square one. Therefore I view with great sympathy what the Government are now proposing. Having said that, we have considerable reservations about a number of aspects of those proposals.
	On one point the Minister and noble Lords on this side of the House are certainly agreed: we do not think that the right answer is to take the matter back to the courts. The reason the problem arose in the first place was the tendency of the courts to award the matrimonial home to the mother and assume that the state system would support the children thereafter. That is one of the reasons why it was felt necessary to introduce the original Child Support Agency. Progress has been made since then. In the previous Parliament the Select Committee of the other place, under the chairmanship of Frank Field, came forward with proposals which resulted in some improvement. At all events, we are now to have a system which runs two formulae side by side--the old system and the new system. That will create a considerable problem in the transitional period. We can agree with the Minister that it is a good idea--indeed, it is essential--to have more emphasis on enforcement and less on gathering information. There are also a number of aspects in the final part of the Bill which deserve attention.
	On the very first page of the Bill there is a declaration by the Minister on the European Convention on Human Rights. It states:
	"In my view the provisions of the Child Support, Pensions and Social Security Bill are compatible with Convention rights".
	There is widespread concern as to whether Clause 61, which deals with the loss of benefit for breach of a community order, conforms with the Human Rights Act or indeed conforms with our international obligations regarding human rights. My noble friend Lord Windlesham is concerned on this point and a number of noble Lords on the other side of the House may wish to express their concerns. I shall not say more on that subject at this stage, but my noble friend Lord Astor of Hever may also wish to comment on it when he comes to speak.
	Part II of the Bill deals with pensions and the introduction of the state second pension. Last year we had trouble because we were discussing the stakeholder pension when we did not know what was going to happen about the second pension. Now we are a little more in the dark about the stakeholder pension--

Noble Lords: Oh!

Lord Higgins: A little more in the light! Either way, because the stakeholder pension is far from clear at this stage. We have to deal with the second state pension separately from the legislation regarding the stakeholder pension.
	Perhaps I may say a few words about the Child Support Agency. The fundamental problem will be running the two systems side by side. There is also the question of a transitional period. The former system was clearly more rigorous than the new system will be and therefore people who are already in the system will say, "Why should we be treated more harshly than those who are now coming within the scope of the Child Support Agency?" Perhaps the Minister might like to say a little more about that aspect of the Bill.
	We are concerned about other matters. The system is of course simpler. But the problem with simplifying matters is that there is less scope for adjustment in individual cases. In the debates in the other place there seemed to be a degree of inflexibility in the Government's attitude regarding certain matters. In particular, we are unclear why the Government have been so determined to ensure that the income of the parents with care is to be disregarded. In certain situations the parent with care may actually be a great deal better off than the absent parent. We believe that there is a case for taking both into account.
	Another aspect which causes us concern is that there is no upper limit on the amount which, under the new simplified formula, will be taken from the absent parent. There are important issues here which we can do doubt pursue in Committee--for example, where someone is immensely rich but an absent parent, the extent to which that income should be transferred back to the children of the original marriage. It can be even more complicated. I remember having a number of constituency cases where there had been three or four marriages in succession. These matters can be immensely complicated. At all events, we believe that there is a case for the upper limit. Perhaps the Minister can clarify for us exactly how long she sees the transitional period lasting. I believe that 2002 for new cases and 2003 for existing cases have been suggested, with a further five years of transitional arrangements.
	We also have some concern, as has the noble Lord, Lord Stoddart, about the penalties to be imposed on those who do not comply with the Child Support Agency's decisions. I find the driving licence penalty a very strange one. When it was first announced we thought that it would be in addition to other penalties. Perhaps the noble Baroness will confirm that it is not in addition to, but is instead of, other penalties. At all events, to quote the American experience seems quite wrong. In America, the removal of a driving licence, which carries a photograph and so on, is a very considerable sanction. Without it, one would be lucky to get anything at all on a credit card. So there is not a reasonable comparison. Noble Lords may like to consider when they were last asked to produce their driving licence in this country and whether, if they had had it removed prior to that, it would have been a severe or effective penalty or even whether the threat of removal, as the noble Baroness suggested, would have been a severe penalty.
	There are other penalties in the Bill, in particular, the reduced benefit penalty. I understand that the Public Accounts Committee in another place took evidence on the matter on 3rd April. Unfortunately, the evidence has not yet been printed so I have been unable to check exactly what the committee has in mind. Apparently it has suggested that this penalty should be suspended during the transitional period. Perhaps the noble Baroness could clarify the point.
	Complicated issues arise with regard to the relationship between cases that will be decided in court with regard to matrimonial settlements and whether, 14 months later, if one or other party disagrees with the original decision he or she can then take the matter to the Child Support Agency. These issues will need to be examined.
	Perhaps I may say a word about other aspects of the Bill before turning to the question of the state second pension. Clause 38 introduces the Government's proposals regarding the vexed question of inherited SERPS, which we discussed when the Minister repeated a Statement on 15th March (cols. 1608-1619). Both I and the noble Lord, Lord Goodhart, expressed some concern. The Statement was made on the basis of the ombudsman's report, and the Government said that they had accepted the report's recommendations. Both the noble Lord, Lord Goodhart, and I had difficulty in knowing what the recommendations were. I asked the Minister for clarification, and she suggested that I should take the matter up with the ombudsman. I have done so. I wrote only recently and have not yet received a reply.
	The report's recommendations--the ombudsman took more than a year to examine four sample cases--are by reference to a letter written by the ombudsman to the Permanent Secretary. I find that a strange way to express recommendations. At no point in the report are the recommendations stated in specific terms. What is clear if one looks at the paragraphs referring to the letter to the Permanent Secretary is that the important issue arises of burden of proof--whether people knew that the arrangements regarding inherited SERPS had been changed. The ombudsman goes on to state that redress should be,
	"on a global rather than an individual basis".
	But that is not what the Government propose. They do not propose a global settlement for everyone who may have been misled by the lack of publicity in regard to widows' SERPS, but have introduced a system--apart from delaying implementation of the arrangement--of individual protected rights. It is not satisfactory for the ombudsman to say, "Let's see what the Government come up with, and then I'll say whether it's all right or not". By this stage he ought to have said what should happen; then we could judge the Government accordingly. Therefore, I very much hope that the ombudsman will make the position clear before our debates at later stages of the Bill. It is a matter which the noble Lord, Lord Rix, and other noble Lords regard as extremely important.
	Perhaps I may make a passing reference to Clause 54, dealing with the prohibition on different rules for overseas residents so far as occupational schemes are concerned. I thought for one wonderful moment that this provision would be with regard to the state pension and the question of overseas residence. Unfortunately, that appears not to be the case. Perhaps that matter can be debated at a later stage.
	Another matter that has recently preoccupied this House is the question of the way in which pensions are drawn. A Question was asked on 12th April about whether benefits would continue to be paid through the Post Office. It applies to all the benefits that we shall consider in relation to the Bill. I asked the noble Baroness the simple question:
	"are we to understand that the Government have not yet decided how the option to continue to receive cash through the post office will work? Will she state clearly by what method people will continue to be able to do so?"--[Official Report, 12/4/00; col. 185.]
	The noble Baroness gave a lengthy reply--for which I was grateful--but did not answer the question. Perhaps I may put the point to her again. By what method will people now be able to draw their cash from the Post Office? It is a matter on which the House has understandably expressed concern. It not only affects pensioners; it affects the position of sub-post offices and has wider implications with regard to the social environment.
	I am conscious of the fact that a large number of noble Lords have put their names down to speak in the debate, but before turning to the question of second pensions I must add one other point regarding the imposition of national insurance contributions on benefits in kind, and in particular contributions to private health schemes. As I understand it, the provision will raise some £225 million a year--yet another example of a stealth tax.
	I turn finally to the question of the arrangements that are made for the second state pension. We are effectively creating a three-tier system. There is the second state pension for those earning over the minimum but less than £21,600; we then have the stakeholder pension; and on top of that we have occupational pensions.

Baroness Hollis of Heigham: My Lords, I think the noble Lord may have misquoted the figures.

Lord Higgins: My Lords, the matter is slightly complicated. In the early stages, as I understand it, the second state pension will be income related and at the later stages it will become a flat-rate pension. So I may have slightly misquoted the figures.

Baroness Hollis of Heigham: My Lords, perhaps I may help the noble Lord. He said that the state second pension was for those earning up to £21,600. That is not so. It is intended primarily for those earning up to about £9,500. From £9,500 to about £21,000 the pension would be a stakeholder pension--people could use the state second pension but it would be less advantageous to them financially than for those earning less than £9,500. It was simply a matter of the income cut-off points.

Lord Higgins: My Lords, the noble Baroness is absolutely right and I understand her point. None the less, there will be a three-tier system: a second state pension, a stakeholder pension, and occupational pensions.
	We welcome the fact that the Bill will help many low-paid people--for example, carers, those with a broken contribution record, those with long-term disablement and so on. That is understandable and will be appreciated. However, there is a problem as to whether the combination of the various levels will effectively divide people into different classes and whether it will be difficult to move from one class of pension to another.
	A further point was expressed in a letter from Age Concern, which is of course very much involved in these issues. Age Concern continues to express concern about the relationship between the pension and the minimum income guarantee at the later stages. Many of these schemes will not become operative for many years, and by that time the minimum income guarantee, which we understand is to be uprated in relation to earnings, will "overtake" the state pension--which is apparently to be uprated only in relation to prices--and any other proposals on that basis. Age Concern believes that,
	"for many people heavily dependent on the basic pension and State Second Pension for their income in retirement, the levels will be inadequate to meet the Government's aim of people not having to rely on means-tested support in retirement".
	It points out that in a situation such as I have described more older people will become newly entitled to means-tested benefit year on year. The relationship between benefits which are based only on prices and the minimum income guarantee which is based on earnings is likely to create a difficult situation in which an individual's contributions, or even those of the state, are inadequate to take him off means-tested benefit, and in the long term he will not gain from the Government's proposals.
	The Bill now before us is clearly in conflict with the manifesto of the Labour Party at the time of the last election. The Labour Party said in the clearest possible terms that it would retain SERPS as an option for those who wished to remain within it. That is not what the Government now propose. I am not surprised to see the noble Baroness, Lady Castle, nodding her assent.
	The Government put forward a series of proposals. On the one hand, they create a situation in which there is likely to be more means-testing. On the other hand, a number of benefits (so-called) are to be introduced; for example, winter fuel payments and free television licences, which go to everyone regardless of need. There appears to be a fundamental contradiction in many aspects of government policy. On the one hand, it is said that benefits must be focused by way of means-testing and, on the other hand, there are to be handouts--I believe that to be an adequate description of the free television licences, and perhaps also of the winter fuel payments--to those who have no need for them. The Government do not appear to have adopted a consistent policy, and it is important that in Committee and at later stages of the Bill noble Lords examine very carefully the whole basis on which the system of pensions is to be constructed.

Earl Russell: My Lords, speaking at three minutes to one in the morning tends to lead both to brevity and bluntness. It was at that hour of the morning that my honourable friend Mr Webb, speaking on Third Reading of this Bill in another place, said:
	"The Bill does not take social policy forward. We regret that it has come before the House".--[Official Report, Commons, 3/4/00; col. 781]
	If we wrap that up in a little more cotton wool it is because we are able to enjoy the courtesies of tea time; it is not that we disagree with that judgment in any way. This Bill has not found favour on our Benches. As usual, my noble friend Lord Goodhart will deal with pensions and national insurance matters, and I shall deal with issues involving the Child Support Act and other miscellaneous matters arising out of the Bill.
	I have been concerned with the Child Support Act for 10 years. I wish I could say that the first 10 years are the worst. One is told that one must be consistent and avoid repetition. Having spent over 10 years on one subject, it is quite difficult to achieve both objectives at the same time. We all believe that we are consistent. I decided this morning to check that out by looking at what I said on 29th October 1990 when the first proposals for the CSA were put before us in the form of a Statement. First, I said that fathers should be responsible for the financial support of their offspring. Secondly, I agreed that the taxpayer had an interest in the matter. Thirdly, I said that the Government would be mistaken to hope for too much from the Bill. Today I could repeat all of those remarks which show absolutely no sign of dating.
	It appears that we are following the line of debate which we had, for example, on the poll tax. Following in a seamless robe of continuity from her predecessor, the noble Lord, Lord Mackay of Ardbrecknish, the noble Baroness has sought to transform this matter into a debate on the willingness or otherwise of fathers to pay. The Minister referred throughout her speech to those who would not pay. I was reminded of the observations of the noble Lord, Lord Waddington, on poll tax defaulters in the debates in this House in 1991. We on these Benches have always sought to argue that the issue is not just about those who will not pay but about those who, because of the nature of the formula, either cannot pay or feel a profound sense of injustice about the terms on which they are asked to pay.
	We agree that there is a hard core of fathers who feel considerable reluctance to support their children after separation or divorce. If, however, one is dealing with those fathers, or any hard core resistance to a government measure, sensible politics demand that one sets out to isolate that resistance, not provide it with a large body of gratuitous extra support. One does not provide those who will not pay with the support of a large number of allies who either cannot pay or feel a profound sense of injustice about the terms on which they are asked to pay. That is the mistake which has been made in all three of the CSA Bills and innumerable CSA regulations with which I have been concerned. Every now and then a fashion sweeps through the Palace of Westminster while leaving the rest of the world almost totally immune. The CSA has been one of them. The CSA has very little support in the country at large, the media or the general body of informed opinion. It appears to enjoy support only within the walls of this Palace.
	The argument here is entirely about the nature of justice. I have said to the Minister before--I am sure that I shall have occasion to repeat it--that it illustrates as clearly as anything could why, although we agree on a great many things, we shall nevertheless always be in different parties. I believe that I am correct in saying that the Bill's notion of justice is fundamentally derived from Plato. That notion of justice is essentially mathematical and invokes consistency. Its claim to consistency relies on what is taken to be a single material point. It is the justice of Procrustes. We on these Benches believe that our notion of justice owes a great deal more to the English common law and, with it, Shakespeare. It begins with the belief that both parties must be heard.
	Nothing has caused more grievance in the whole of the CSA than the fact that those who feel aggrieved by its operations are simply not entitled to a hearing. They write to me in their hundreds--I suspect that they write in their thousands--setting out reasons why the assessments appear to them unjust. Some of those reasons are bad, some are good and some very good indeed, but in all cases they believe that they are entitled to a hearing. One after another I must write back to say that, by the decision of Parliament, the CSA is not allowed to give them a hearing. That is the basis of a great deal of resentment.
	For us, justice is a bottom-up matter. It does not come down from the top simply as a Mikado-like decree. It comes up from hearing the facts of the case. When one has heard the facts of the case, one is allowed a certain element of discretion and, above all, the quality of mercy. Justice without mercy seems to me impossible. Nowhere in the formula of the CSA is there any room whatever for mercy, and we do not believe that that can be right. The Minister shakes her head. I know she does not think it, but I beg her to accept that we do. We cannot start from anywhere other than where we are. We think that the formula is unjust because it is a formula.
	I shall not dwell at length on the obvious points about housing, travel to work, or support of aged parents who need nursing care. I am sure the Minister will say that you do not claim those factors against taxes. Fair enough; but just because you cannot claim them against taxes, you cannot apply the same rule to child support. It is the nature of the case that you can make only one thing top priority.
	Let me cite an actual case to the Minister. It dates from before the CSA but the principle to which it gives rise affects it. A woman was bankrupted by being left £1 million in shipping shares. In case that perplexes your Lordships, she was left the shares in April 1929 when they were assessed for duty which was payable in October 1929. On a day when the morning headlines envisage losses of £100 billion on the Stock Exchange, we are not entitled to say that that cannot happen here. Anyone asked to meet an assessment which was based on the financial situation and took no account of the debt which had made him bankrupt would be in a fairly sticky position.
	I do not think that the Government have ever understood quite how multifarious the situations of matrimonial break-ups are. A man settled a large capital sum on his ex-wife which should have set her up for life. She remarried, and her second husband, who put all the money into property on top of the boom in 1988, went bankrupt and left her. The CSA then assessed the first husband a second time for the same child on whom he had already made a fully adequate settlement. He thought that unfair. The CSA was unable even to give him a hearing. That causes resentment.
	Not enough account is taken at any time of the need of people who wish to remain employed, especially in rural areas, to retain their cars. I agree with what the noble Lord, Lord Stoddart of Swindon, and the noble Lord, Lord Higgins, said about driving licences. It is no good saying, as the Bill does, that the courts are to take account of whether the person needs to drive to remain employed. They can only assess the need to drive to be employed at the time. But in the flexible labour market in which we now live, people may lose their jobs through no fault of their own and in many parts of this country they cannot look for work unless they can drive.
	I shall table an amendment to delete the clause and, as a fall-back which makes my point, I shall table a further amendment that those so deprived shall be exempt from the actively-seeking-work rules until they get back their driving licence. Depriving fathers of their right to earn their living is killing the goose that lays the golden egg.
	I regret deeply that there is no room for negotiation between the parents. After all, in those cases where they are co-operative with each other--and such cases occur--they know their situation better than anyone else. I have the report by Ann Corden and others by the Family Policy Studies Centre on child maintenance regimes in other European countries. It states:
	"A key finding is that across Europe, at least in the case of divorce and separation, large numbers of maintenance determinations incorporate or build on agreements worked out by the parents themselves. In countries where parents are required to behave in this way, there are arrangements for advice, help or mediation, and much of this is free of charge ... developments in the UK ... appear to be heading in the opposite direction compared with these other European countries".
	The Minister will of course invoke the interests of the taxpayer. That is fair enough. The noble Baroness heard the full passage that I quoted. She knows the report already. There is machinery within the system for the Treasury to be able to put its case before the negotiation is concluded. The present exclusion of any negotiation reminds me of the proverbial professor of the ancien regime in the University of London who once commented of a syllabus reform proposal, "This proposal originates with the teachers of the subject which I regard as a most improper manner".
	We on these Benches agree strongly with the criticisms which have been made on the loss of benefit for breach of community service orders. My right honourable friend Mr Kennedy committed us to this in the Queen's Speech debate and I cheered him to the echo. When we are dealing with people who already have a criminal record, and we deprive them of any legitimate means of making a livelihood, does it take much imagination to ask, "What are these people likely to do next?"
	The Minister knows well that we on these Benches have a profound concern about the effect of disentitlement on those who suffer it. I thank her for drawing my attention to DfEE Report No. 68 to which we shall return. It has some interesting information on whether people who were disentitled felt that they had suffered hardship, and whether they felt angry about it. It is not a particularly startling discovery that on the whole they did. What one does not gain from the report is an answer to what we on these Benches have been asking from the beginning. What income is available to people who are disentitled? By what means, legal or illegal, do they gain that income? What hardships do they suffer? What do they have to forgo to live on it? What behavioural effects does the disentitlement have on them? The Minster said generously that the system will be introduced by pilot schemes. We on these Benches hope that the pilot schemes will answer those questions. We are ready to negotiate about how that should be done. The skills of my honourable friend Mr Webb in matters of social security research are considerable. But if it is not done, we shall not answer for the behaviour of these Benches when the regulations are ultimately put before the House. I hope that the Minister is listening.

Lord Williams of Elvel: My Lords, the noble Earl makes an important point. Is he speaking from the Front Bench of the Liberal Democrat Party, or is he speaking for the Liberal Democrat Party in general?

Earl Russell: My Lords, I am speaking from the Front Bench in words which I agreed this morning with my Chief Whip. They are guarded words but they are intended seriously, and I hope that that point is clear to the House.
	The Minister will say a great deal against the courts. She might take account of some of the points made on the other side of the argument. The Government have poured money into the CSA. By contrast they did nothing to improve the funding of the courts. They did nothing to improve the staffing of the courts. They did nothing to improve their enforcement powers. They did nothing to co-operate with them to make sure that their warrants received priority. The Government accuse the courts of inconsistency. In many cases what the Minister calls "inconsistency" I call "consistency" because it takes account of the facts of the case.
	If there is a problem with other cases, the Government have the power to issue guidelines. I had a stab at that during Report stage of the Bill in 1995. However, when the Government come to giving figures for the cost of going back to the courts, I cannot help suspecting that those figures come from the same stable as the figures which we heard regarding the cost of the freepost in the London mayoral elections. I have much more to say, but I shall not take up more of the House's time now; we shall hear it later.

Lord Rix: My Lords, as the noble Lord, Lord Higgins, noted, this Bill is rather like the excellent finger buffet one is served at a reception in the Cholmondeley Room: rich in variety but with at least one canape or cheese dip which one does not much like. I have my favourite in this strangely assorted mixed salad of a Bill which, beginning with "Child Support" in the title, rapidly goes through the ageing process and reaches the "Preservation of rights in respect of additional pensions"--that is, SERPS--in Clause 38. Perhaps the parliamentary draftsman had Wordsworth in mind, predicting our joy when we reach our sere and yellow, and those rights are well and truly preserved:
	"My heart leaps up when I behold
	A rainbow in the sky: So was it when my life began; So is it now I am a man; So be it when I shall grow old". But does my heart leap up when I behold Clause 38? Not quite. I fear that there is still a tiny flutter of atrial fibrillation for, although the clause is rather pompously explained in the Explanatory Notes as ensuring that,
	"people who were denied the opportunity of considering taking relevant steps to protect their spouse's position because they received incorrect or incomplete information, can seek redress",
	nowhere in the clause is a clear indication given as to how the regulations will provide that remedy.
	Noble Lords with good memories will recall our welfare reform debates on SERPS last year. In those debates, we sought to do justice to widows and widowers who were threatened with a 50 per cent cut in their inherited earnings-related pensions rights as a result of a 1986 change which remained one of the Department of Social Security's best kept secrets for most of the next 13 years.
	I am most happy to give credit to the Government for seeking an honourable way out of this mess (not of their own making) and acknowledge that the other place accepted the spirit, if not quite the structure, of my multiple choice amendment on SERPS. As a result, as we have already heard, on 15th March Ministers announced how they proposed to use the powers accorded to them by the Welfare Reform and Pensions Act and to offer compensation to those who could show that their spouse had lost out through their following duff advice when accurate advice would have enabled them to make wiser pension choices. Those who received no advice at all--the vast majority--appeared to be excluded.
	So now we have Clause 38--one of those beautifully crafted texts which takes a complicated message and makes it totally incomprehensible. As far as I can see, it still ties recompense to tangible evidence of loss. And there's the rub. I should like to see greater certainties written into the Bill for the benefit of those whose age makes it clear that they have lost out or whose disability prevents them arguing their case without requiring them to prove chapter and verse what they knew and what they could and would have done had they known differently. It seems to me unreasonable to insist that the victim of a robbery should provide evidence as to what he could and would have done had he known he was going to be robbed.
	Therefore, I shall take it upon myself--together, I hope, with other noble Lords--to table in Committee an amendment which addresses those ambiguities in clear and unequivocal terms. I hope that the Government will take that amendment away, study it and accept it, or come back with their own satisfactory, sanitised version. The issues that I shall seek to address concern those people, now retired, who contributed to SERPS in the years between 1978 and 1986 when it automatically provided a 100 per cent legacy for the surviving spouse; those who have reached state retirement age and never had a chance or the notion that they had to opt out into more lucrative second-life pensions; those who are nearing state retirement age and are also unable to make up the deficit; those who have been conned only for a short time and have years ahead in which to provide for a better life in old age; and those who, sadly, through the ageing process, are no longer able to recall or even understand what SERPS is all about.
	My amendment will be reasonably short, to the point and, it is hoped, clear even to the Benefits Agency. However, I gather that we are soon to have our own--our very own!--pensions branch which can start life without a single blot on its escutcheon if the SERPS scandal is but a thing of the past. The Government, too, deserve much credit for having started to muck out the Augean stable. Let us hope that straightforward guidance on the face of the Bill will enable them to complete their Herculean task with speed, efficiency and, dare I say it, generosity.

Baroness Pitkeathley: My Lords, I welcome the Bill for its attempt to tackle poverty for both young and old. I endorse its redistributive principles in helping the poorest citizens and its aim to put into place systems which actually work. Anyone who has had dealings with the CSA over past years knows about its complexities and its tendency to get sums wrong more often than it gets them right. Not only will the new proposals in the Bill simplify matters, but they will enable more than a million children to benefit, many of them for the first time.
	So far as concerns pensions, the aim of the Bill is to ensure that everyone who has put in a full working life will receive a decent pension above benefit levels. It is especially important for me that a full-time working life now includes a full caring life. It is on that aspect of the Bill that I want to concentrate.
	I warmly welcome the development of the state second pension as an important step forward for carers. For the first time, carers who are in receipt of invalid care allowance will be given more than just protection of their basic state pension; they will also be given a credit into the second-tier pension. Arguably, that is the most positive and significant change to carers' income since the invalid care allowance was introduced in 1976. The last positive change introduced to ICA was in 1993, when the earnings limit on the benefit was raised to £50 a week.
	Therefore, why is the state second pension so important to carers? It is because many of them give up paid work in order to care. In 1996, the Carers National Association found in a survey that 50 per cent of carers had given up paid work in order to take up a caring role. As a result, carers who provide a substantial amount of care store up poverty for themselves for the future. The state second pension will seek to change that by recognising the value of the support given by carers.
	The new provisions could start as early as 2002. Carers who receive ICA, have an underlying entitlement to ICA or receive home responsibilities protection will be credited into the scheme as if they were earning £9,500 a year. There are several reasons why that represents a great step forward for carers. First, a carer who receives ICA at £40.40--it is the lowest of all the benefits--for 52 weeks receives the sum of approximately £2,070 for a minimum of 1,820 hours' care per annum. I ask noble Lords to think about that sum. Crediting carers as though they earned £9,500 per year values that care at over three-and-a-half times the level of the invalid care allowance. The lower earnings threshold of £9,500 of the state second pension compares very favourably with the earnings that carers forgo. A survey by Caring Costs in 1996 found that the average wage given up by carers in order to care was £9,000 per annum. Unlike ICA, which rises in line with prices, the state second pension will rise in line with earnings year on year.
	In order to receive one year's credit, a carer must be receiving ICA throughout the year. That is defined neither in the legislation nor in the Explanatory Notes, but discussion in Committee and on Report in the other place suggested that it meant 52 weeks in a year, although that has never been stated. Low earners who earn above the lower earnings limit would be credited in at the same level. That means that as long as carers earn over the lower earnings limit or receive ICA throughout the year, they will receive credits for the state second pension.
	But there are a couple of potential problems in relation to that entitlement to which I want to draw the Minister's attention. The contribution condition requiring ICA throughout the year may result in two particular groups of carers being excluded from receipt of that important new pension. They would be carers who have lost ICA because the person they care for has had one or more periods in hospital or respite care which in total amount to more than 28 days in six months.
	I give your Lordships an example. A mother cares for her son who has severe learning difficulties and physical disabilities. He goes into residential care every few weeks. Because of the linking rules, she becomes disentitled to ICA after her son has had a total of 28 days in respite care. She cannot work because she is exhausted and because the residential care is not a regular feature but only occasional and her son needs 24-hour care when he comes home. She does not have a full year's contribution and loses out on another year's pension. The mother cannot see the situation changing unless the son goes permanently into residential care and she does not want that to happen. So for the years for which she is caring for her son she will have no additional pension.
	The second group of people who may miss out are those who have lost ICA because they have earned over the £50 per week earnings limit in one or more weeks but whose earnings over a year do not reach the lower earnings limit for national insurance contributions. For example, Tom has a part-time job in a small workshop near his home in between caring for his mother. It has been a very good year and the boss wants to reward him with a Christmas bonus. The Benefits Agency takes into account Tom's bonus over the following month. His bonus, which is only £20, takes him over the earnings limit for the ICA so he loses a full month of ICA. He does not earn enough to pay national insurance and because he does not have a full year of ICA he loses out on another year's pension contributions.
	Those problems seem to me to be out of step with two of the Government's key strategies in relation to carers: first, their stated aim of ensuring that carers have greater access to breaks under the carers grant. That was a new grant of £50 million introduced under the National Carers Strategy to local authorities to provide additional breaks for carers. It has been welcomed by carers and is very well used. The other part of the Government's strategy is to ensure that carers maximise work opportunities, recognising that paid work for carers is not only important financially but also socially and emotionally.
	A solution to those problems could be found by relaxing the entitlement condition of receipt of ICA to, for example, 26 weeks or more in a year--I imagine that that could be done through a regulation-making power--or by making other measures more generous; namely, home responsibilities protection. I understand that the Government are considering that and I hope that the Minister will be able to confirm the relationship between HRP and the new scheme in her reply.
	I cannot miss the opportunity to bring two further issues to your Lordships' attention if the financial disadvantage of carers is to be addressed. These really need to be looked at. The first is the issue of back-dating and the second is helping carers over retiring age.
	Carers will begin to build up credits towards the state second pension only from 2002, leaving many carers--hundreds of thousands perhaps--who have been caring since 1978 without credits towards an additional pension. That may leave many current and former carers facing poverty in retirement. I know that the issue of back-dating was discussed at length in another place but the Minister could give no guarantees about back-dating. In fact, he said that the administrative barriers prevented it.
	It is vital that carers over the age 65 are given more financial support to meet the costs of caring and that those who have been left in poverty in retirement because of a lifetime of caring should also be given additional financial support. Ideally, I should like to see the state second pension back-dated to 1978. If that is not possible, it may be possible to introduce short-term measures; for example, allowing carers over retirement age to claim ICA for the first time. I know that it is an income replacement benefit, but the fact is that the overlapping benefits rule would mean that most carers could not claim that anyway but they might be able to access the carer premium, which would help with meeting the additional costs of care; for example, transport, laundry, convenience foods and so on.
	Finally, I remind the Minister of one of our earlier debates on welfare reform when she stated that the Government would be undertaking a review of the invalid care allowance. She said that it was not possible to give a timetable at that stage but that carers' organisations would certainly be consulted. I should welcome any further information about a timetable for the review and would like to know whether the issue of financial support for older carers will be considered in the review.

Lord Windlesham: My Lords, every so often in a Bill unconnected with the penal system a proposal is slipped in without any real consideration as to whether or not it conforms with the principles of justice. That is because the context is different.
	Buried in the 148 pages of the omnibus Bill which we are considering today is a prime example. It is to be found in the proposals contained in Part III, giving powers to the Secretary of State to withdraw or reduce benefit when a person subject to a community sentence fails to comply with its terms.
	The fundamental objection to that proposal is that it is nothing whatever to do with the Secretary of State for Social Security or, indeed, any other Minister. Probation is the result of a judicial process. Probation orders and community service orders are orders of the court. Some of your Lordships--I see the noble Lord, Lord Shepherd, in his place opposite--will remember Baroness Wootton of Abinger. Community service orders owe more to her than to any other single person. What she would be saying today were she here to take part in this debate defies imagination.
	Both orders were introduced by statute after long and thorough consideration. Their purpose and operation was quite clear. It is simply wrong that they should now be hijacked by any Minister to make his own unrelated policies more effective. There may be a case for making those policies more effective, but not by this means.
	The prospect that these clauses, should they be enacted, may be an early casualty under the obligations assumed by the Government and by Parliament in incorporating the European Convention on Human Rights into domestic law does not warrant their acceptance now.
	That the effect will be discriminatory cannot be denied. Let us assume that two offenders subject to probation or community service orders are returned to court as a result of failure to comply with the conditions of the orders. Typically, the reasons will be missing an appointment with a probation officer or failing to attend a session of community service. One of those offenders has earnings; the other is on benefit. Both are found to have breached the terms of their respective orders. Yet whatever the court decides by way of penalty, which may be a custodial sentence or some other penalty, the Bill intends that the offender in receipt of benefit should be subjected to an additional mandatory sanction in the form of loss or reduction of benefit. It is hard to see how double punishment of that sort will withstand the challenge it will inevitably attract once the Human Rights Act is implemented.
	As if that were not enough, having invaded territory that more properly belongs to the Home Office, the Secretary of State for Social Security and his advisers have devised a remarkable administrative procedure by which the penalty actually precedes the trial. As soon as a benefit office is notified by the Probation Service that an offender has been referred to the court for breaching the conditions of a community sentence, the specified social security benefits will be withdrawn or reduced. It must be wholly wrong for benefit to be withdrawn or reduced before the court has found that the alleged breach of the order is proven. The fact that arrears will be repaid later, if the court finds that no breach has taken place, must be scant consolation.
	We have to keep in mind the characteristics of the constituency at which these new provisions are aimed. Many will be persistent offenders who have been before the courts previously, often many times before. Some will be in work, but most will not be, whether because of lack of job opportunities or their own motivation. A high proportion will be male. As black males typically have a higher unemployment rate than white males, they are likely to be over-represented in the group of offenders most liable to incur withdrawal of benefit. There will often be dependants who will suffer from loss of benefit, leading to greater family impoverishment, possibly providing an incentive for still further offending pending a court appearance.
	Something that is hard to get into the minds of those with little knowledge of the working of the penal system is that a large bulk of offending is opportunistic; it is not planned in advance. So the idea of sending "a clear message", as the Secretary of State described it at Second Reading in the House of Commons, to such a disparate an audience is far-fetched in the extreme.
	It is also worth noting the Secretary of State's response to an intervention from a Back-Bencher in the same debate. When asked whether removing benefits would encourage rehabilitation or would lead to further offending as circumstances became more difficult, Mr Darling's reply hardly corresponded with his Parliamentary Under-Secretary of State's later denial in Standing Committee that the forfeiture of benefit was not a punishment. She argued, using a phrase that is surely worthy of "Yes Minister", that it was not a punishment; it was "an additional benefit conditionality". If conditionality is to be the lifebelt to which the Government now intend to cling, there was certainly no hint of it in the Secretary of State's Second Reading speech.
	When asked the question to which I have just referred, what was his answer? Speaking impromptu and not scripted, he said,
	"There are provisions for hardship, but the remedy in cases such as the hon. Gentleman described lies in the hands of the person who breaks a probation order. People are not required to live in poverty or to lose their benefit. They are required only to do what the court tells them to do. If they are not willing to do that, they can have no cause for complaint".--[Official Report, Commons, 11/1/00; col. 160.]
	In that comment the unmistakable tones of new Labour authoritarianism can be heard.
	Should this misguided measure become law, I suggest that the outcome may be the opposite of what the Government intend. On this side of the House there will be little disagreement that community sentences should be rigorously enforced and that probation officers should be resolute in returning offenders to court for persistent non-compliance. However, if probation officers know there is a possibility of unjust results, there must be a temptation, to put it no higher--and certainly not to approve of giving way to such a temptation--not to record failure to comply so as to avoid these consequences. That observation is not mine. It comes as a warning from the National Association of Probation Officers. Whether we like it or not, we would be unwise to disregard the forecast that,
	"the regulations may make staff reluctant to breach. Benefits are set at subsistence level. Many staff would not find it morally acceptable to push offenders and their families into further debt and possible destitution".
	I repeat, this is a misguided measure. For the reasons explained at the start of my speech, it is wrong in principle. It is certain to have harmful consequences, and is unlikely to produce the results the Government intend.

Baroness Turner of Camden: My Lords, we have another complex Bill on these matters, which my noble friend the Minister introduced this afternoon with a skill and clarity we have come to expect from her. She will not be surprised to hear from me that there are aspects of it, particularly relating to pensions, which cause me some anxiety.
	Other parts of the Bill seem to offer some improvement on what we have had before, particularly those sections relating to child support with the emphasis on more money going to the support of children. If my reading of that part of the Bill is correct, no pressure can in future be applied to women to make them divulge the father of a child, particularly if there is concern about violence. That is very much to be welcomed.
	Another section would appear to indicate that imprisonment is ultimately envisaged for parents who fail to pay up. Then there is the driving licence disqualification, also to be used as a form of punishment. Reference has already been made to that by my noble friend Lord Stoddart and the noble Lord, Lord Higgins.
	I too wonder about the effect of those measures as possible deterrents, particularly in cases where a second family is involved and the parent concerned may be experiencing genuine difficulty in meeting his commitments. These are complicated matters, and the degree to which legislation can deal with them is doubtful. Perhaps my noble friend will explain government thinking in that regard.
	My main concern is with the section dealing with pensions. It is not possible to consider this section of the Bill without referring back to the Welfare and Pensions Bill, now an Act, considered in this House last year. Indeed, both pieces of legislation are envisaged in the Government's comprehensive paper, (CM 4179) Partnership in Pensions.
	My noble friend will be aware of my commitment to the basic pensions structure known as the "Castle Plan", for ever associated with the name of my noble friend Lady Castle. Partnership in Pensions significantly departs from the concept on which that plan was based. I am fully aware of the Government's criticisms of SERPS; that it did little for the low paid, although the original concept certainly would have done. If the basic pension had been increased in line with the wages index, a single pensioner would now be receiving around £94 per week and on top of that some SERPS entitlement. That would have lifted many people entirely out of poverty.
	However, we have moved on from there; the previous government destroyed that package. What we are now presented with in the Bill is the second-tier state pension. We are told that it will be much more generous than the present SERPS. The low paid will receive pensions as though they had been earning £9,500 a year, even had they not been doing so. The Government have decided to target provision towards the low paid in an attempt to alleviate poverty among pensioners.
	However, it is clear from the government publication to which I referred that the second-tier state pension is regarded as a transitional provision only. Ultimately, there will be a flat-rate pension for the very poor. Everyone else will be encouraged on to stakeholder pensions; in other words, on to the private sector. We are seeing here a withdrawal of the state from pension provision for all except the very poorest--and that is where I have a fundamental disagreement with the Government. I am a supporter of the principle of social insurance. What the Government are proposing departs from that principle. A system which is targeted at the poorest, ultimately, is poor law provision. Targeting means means-testing. That is never likely to be popular; certainly not with the present generation of pensioners.
	I know that the Government have introduced the minimum income guarantee to be paid through income support. I am glad that they intend to take steps to ensure that there is a take-up by all those entitled to claim it. It is now to be worth £78 for a single pensioner and £121 for a couple. Moreover, the MIG will rise in line with the wages index instead of the retail prices index. Incidentally, I believe that that is a further indication of the Government's intention eventually to run down the value of the basic state pension. There have been moves to assist pensioners through the increased fuel allowance and free TV licences for the over-75s. They are welcome, but they do not deal with the basic need of pensioners for a reasonable income. They are hand-outs rather than income; and, of course, the MIG is subject to savings limits--I understand that the Government are reviewing those limits--and that over time entitlement is lost altogether. I believe that the upper savings limit was £8,000, but that it is now being reviewed.
	No doubt my noble friend will again tell me that many pensioners are now rich. Indeed, that was repeated in the statement issued by the DSS regarding its campaign on the MIG take-up. We are told that during the past 40 years pensioner incomes have risen faster than earnings. I have yet to meet a rich pensioner. Last week, I went to talk to the pensioner section of my union. Like many unions, we now allow pensioner members to retain membership at a reduced rate. They have their own organisation within it, and I met the London group last week. The meeting was well attended, but they were unanimous in their plea that the earnings link be reapplied to the basic pension. They were not really poor; most had occupational pensions, but not pensions which could be described as "generous". The basic state pension was a significant part of their income.
	Indeed, most occupational pension schemes are devised on the assumption that they are second tier; in other words, they top up the basic state pension. For two-thirds of today's pensioners, the state benefits comprise the majority of their income, yet the DSS statement says that a "minority" of pensioners have missed out in all this wonderful pensioner prosperity. The myth of the well-off pensioner is very much exaggerated. Indeed, I believe that it is very odd and I want to challenge my noble friend on that.
	We are told that pensioner incomes have risen faster than the wages index. That cannot, of course, refer to the basic state pension because we know that it has not risen beyond the RPI. I have a great deal of experience of negotiating occupational pension schemes. In general, they do not move beyond the RPI. Indeed, there is a kind of formula that we often utilised in the early 1970s, when they were being negotiated: that the total occupational pension would rise in line with the RPI to a maximum of 5 per cent per annum; if the RPI was less than that, the pensioner would receive the lower figure. Taking those two figures together, it cannot be true that the income of the average pensioner with an occupational pension outstripped the wages index in that period. There was no structure available for that to occur; the argument cannot be justified.
	In any event, why should not well-off pensioners receive the same basic state pension? They will have paid more heavily for it and will be taxed on it, which poorer pensioners will not. Allowing the basic pension to decline and increasing means-testing erodes the contributory principle and threatens the survival of the basic pension long term. But perhaps that is what the Government are really after. Perhaps the ultimate objective is the complete withdrawal of the state from pension provision and then everyone will be steered towards stakeholder pensions. There will be no compulsion, and employers, while providing access to stakeholder providers, will not have to make a contribution. The schemes will be money purchase--in other words, risk based with employees bearing the risk. The outlook for future generations of pensioners is not good unless there is a growth in good occupational pension provision.
	A section of the Bill deals with occupational pensions and contains reference to employee trustees. The sections of the Bill, including schedules, seem extremely complex, but there is one aspect that we must explore further in Committee. I do not see why provision could not have been made for 50 per cent of the trustees of a pension scheme to come from the workforce or pensioners. I also believe that since the duties of trustees have become more onerous as a result of successive pieces of legislation, it is vital that they should be suitably trained. Everything possible should be done to encourage the provision of occupational pensions as there is a general view, which I share, that they have been a success in the past 20 years.
	The NAPF has expressed some concern lest stakeholder pensions, unless the employer has to contribute, may be used by some employers gradually to withdraw from occupational pension provision on the basis that stakeholder pensions, for which they have to provide access, render occupational provision no longer necessary. Of course, it is cheaper for the employers because they do not have to contribute. I should welcome my noble friend's comments on that point.
	In the mean time, I again thank my noble friend for the way in which she has presented the Bill. We shall have a great deal more to say about this (and other issues to which I have not had time to refer) when we are in Committee.

Baroness Strange: My Lords, as Easter is approaching, I shall try to be like an Easter hare, galloping through my speech at great speed so as not unnecessarily to burden your Lordships. As the Minister might guess, I am only following through the amendment moved in another place and putting in a small plea to the Government--or to that part of them currently engaged in the MoD review--not to forget the plight of the 2,650 war widows currently in receipt of the Armed Forces family attributable pension, which they would lose in the event of remarriage.
	As your Lordships must be aware by now, both the Goode and the Bett reports recommended that this pension should be for life, regardless of future marital circumstances. This pension, unlike the ordinary war widow's pension, has been contributed to by the husband. If he had retired in the normal course of events, he would have received this pension for life. It hardly seems just that if he is killed in the service of his country his widow should not receive this pension for life.
	The issue was discussed and also voted on in another place on 3rd April and several of the relevant short and pithy speeches mentioned that it had been a cause close to the heart of the late Mr Michael Colvin. We in this House who also knew and loved him and his wife are still shocked and saddened by their deaths. In looking at all my former speeches on this subject and those of my noble friends from all parts of this House, my desk has been even more littered than usual with papers--well over six inches high. I hope your Lordships will not be alarmed. I am not going to reiterate any of them. I had also forgotten that Mr Michael Colvin had written to me on this subject. So, on the last two weekends when I returned home, I have been startled to find a different letter to me from him on the top of the pile. When I am away, letters are tidied into heaps on my desk, but no-one files or arranges them. I cannot help feeling that the emergence of those two letters on this subject, like stones out of a clay soil, has some significance.
	I am aware that the question of retention for life of the Armed Forces family attributable pension is even now in the MoD being discussed with the Defence Review. I have not forgotten this issue, nor indeed have your Lordships; nor have the 2,650 war widows concerned, for some of whom it is a pressing personal issue; nor have all the other war widows, nor have our Armed Forces. I hope that the right honourable Secretary of State for Defence and his team will also remember.

Baroness Castle of Blackburn: It was very kind of Lord Bruce to try to encourage me to my feet. I hope he is not injured by the stumble. It will surprise no one to know that I intend to concentrate my remarks on the state second pension section of this complicated measure. I will make a confession: I have not even read the rest of it. If I live long enough I might get around to it, but the amount of time taken to work one's way through Clauses 30 to 39 showed me that I really would have to devote a large amount of effort and time to reading the whole Bill.
	One of the first things that struck me about it is its wording. Incidentally, I wonder whether anybody in this House, has read the whole Bill. If you look at the wording, it reminds me of what Lady Turner was saying about the money purchase schemes putting the risk on the pensioners, because this Bill puts all the risk on the reader: there is not one line that does not refer one back to six other Acts. To do that, I would have to get a library full of books and sit there asking, "What's it mean?" My devoted secretary was reading Clause 30 to me the other day and I said to her, "I don't understand a word of it: read the Explanatory Memorandum". She said, "Oh, that was the Explanatory Memorandum!"
	It is a kind of disease of this Government. It reminds me of the philosophy of the woman they admired so much, Lady Thatcher. I once described that philosophy as "Confuse and rule". This process is going on today in all our discussions and all our attempts to get together an integrated and coherent pension scheme. Instead, we have had the "salami solution"--give us one slice one year and another in another year and so on, until we have lost all sense of the interrelationship of one bit to another.
	I will give the Minister one particular illustration. It is fashionable to say that we are discussing a second state pension scheme; that they are not abolishing SERPS: they are merely replacing it with something that would be more generous. That is a very important claim, and if it were true we would have to consider it very seriously. But it is by taking the Bill in sections that they are able to disguise what is actually happening.
	Lord Higgins, quite rightly, quoted the reference to SERPS in the Government's manifesto. They were not going to abolish it, they said, but retain it for those who wished to take part in it. Now we are told, "We haven't broken a pledge; we have reformed SERPS." I am sorry, but anybody who says that cannot have read the very clear Act I introduced and the even clearer White Paper, describing it in its entirety, which was called rightly Better Pensions.
	What we stressed in our Bill was that we were talking not about a basic pension or a second pension but about the components of one income that the pensioner would get on retirement. The Bill said that the income received on retirement consisted of two components: one was the basic state pension and the other was the earnings related one. They were merged into just one income.
	Now the Minister, skilfully--I entirely agree with Lady Turner on the skill of the Minister and I sometimes wonder what her conscience is like at night--has been plugging away, taking just one of those components in isolation and saying, "Oh, but look how much more generous we are being". She has repeated again today--I shall have to look at her exact words in Hansard--that so many pensioners will get a second state pension, worth so much, et cetera; but she carefully did not tell us what was happening to the second and basic component: the basic state pension scheme--and that is an integral part of a retired person's income.
	What is the good of giving people a little bit more and calling it a "state second pension" while at the same time ignoring the fact that the other component is deliberately being left to wither on the vine? I entirely agree with Lady Turner when she said, first, that she is a great believer in state insurance--I am, too--and, secondly, that she was worried that this Bill was deliberately designed to destroy the state insurance scheme. That is what the Government's persistent refusal to restore the earnings link for the uprating of the basic pension component means.
	By the way, as I understand it, and I am willing to be corrected by my noble friend the Minister, you do not get all this second state pension from the word "go": you have to work for 41 years for it now. If I am wrong about that, no doubt she will correct me with enthusiasm. One hears the description that this is all rather like a ripe apple waiting to fall into the eager pensioner's hands so that the pensioner will not worry that the basic state pension component of their income is shrinking year by year in relation to the national prosperity.
	That is why the major battle remains, and must remain, the demand for the restoration of the earnings link for this important component of the retired person's income. Incidentally, I was waiting eagerly to hear what Earl Russell had to say on the matter. I was very disappointed that he said that he was not going to deal with it but leave it to Lord Goodhart. I was interested, because he refused to back an amendment to restore the earnings link which I and a number of my colleagues, including Lady Turner, pressed on the Welfare Reform and Pensions Bill. He said that he was waiting to see what the state second pension provides. I wanted to know whether he had been satisfied. I am particularly interested because the Liberal Democrats are a little divided on this issue.
	In another place a few days ago, rebel Labour MPs moved an amendment to the Bill to restore the earnings link for the basic state pension--that other essential component in a retired person's income. I am glad to say--I do not know whether this House realises it--that no fewer than 31 Liberal Democrat MPs voted with the Labour rebels. I hope that I live to see the day when there are a few real Liberal rebels left in this House; 31 Liberal Democrat MPs! It is true that I heard the Liberal Democrat leader Charles Kennedy tell Jonathan Dimbleby on a TV programme on a recent Sunday that he did not support the restoration of the earnings link because it would cost too much. So what has happened to the Liberal Party? It is not the tail wagging the dog, but the body wagging the head. So I await Lord Goodhart's speech--

Lord Goodhart: My Lords, I am most grateful to the noble Baroness. Perhaps she would be well advised to wait to hear what I am going to say in winding up on the debate.

Baroness Castle of Blackburn: Yes, but I was having a little tete-a-tete with Earl Russell. I spend a great deal of time in this Chamber listening to what he says, so I thought that he would want to explain whether what the Bill proposes on the state second pension had converted him. I still wait--

Earl Russell: My Lords, perhaps I could make it clear that in this Chamber my noble friend Lord Goodhart speaks for these Benches on pensions.

Baroness Castle of Blackburn: I am surprised to hear that. I have heard a great many words from Earl Russell about pensions. Never mind; if the Liberal Democrats have two spokesmen on pensions, the more the merrier, as long as they end up with one policy.
	The restoration of the earnings link is not just a rather pretty idea, as some of us have said. It basically affects the whole structure of pensions if you look at it as a whole. Take, for instance, the crediting-in proposals in the Government's provisions. I, of course, welcome the announcement regarding people earning between the lower earnings limit and £9,500 per year, which is--I believe that I am right--only half average national earnings. Half national earnings has been defined on more than one occasion as the dividing line between rich and poor. Of course I welcome it. But what people do not realise is that when we drew up our pensions scheme, the lower earnings limit was fixed to tally with the basic state pension. If the earnings link, which was an integral part of that policy, had not been abolished by Lady Thatcher's government in 1980, that basic state pension and, therefore, the lower earnings limit, would today be £97 per week for a single pensioner; above any of the figures about which the Government have been boasting that they are to lift people's income to through means testing.
	People wanted more. People would retain their dignity. I am appalled at the lack of understanding in this House about the importance to poor people of their dignity. It is all the more important if you do not have much of anything else. Means testing, as anyone's postbag shows, shocks most pensioners--or a large number of them--because it humiliates them. I received a letter--I meant to bring it with me, but there you are; you are spared it. One chappie wrote to me with the details of what he had to claim to, or admit to. He said, "My advice to anyone thinking of claiming income support is: don't". It was only a few days ago that I received that letter. I do not say that I endorse that advice; I want people to get as much money as they can to meet their needs.
	But look at the picture; look at the mess that we are getting ourselves into. The Government have spent two years on nine pilot schemes trying to find out why people are not claiming. They tell us--the Minister said so to me in debates on the last Bill--"We discovered that large numbers of them are too well off, yet they are people who claim to be entitled to it". But that has not stopped the Government from announcing that they are to spend £15 million, starting next month, to make sure that everyone who is entitled to the minimum income guarantee claims it. They are going to have television shows, television call-ins and heaven knows what, with advertisements, costing £15 million, almost--that is nothing, is it?--to try to persuade people to take a minimum income guarantee. I wonder whether we will be told at the end of that exercise that, "Oh, the trouble is that most of them are earning too much".
	We are not being honest with ourselves. We are not being intellectually worthy of our responsibilities. When I set out with my colleagues and a wonderful band of special advisers to work out an improvement to the pensions scheme, way back in 1974, we were not airy-fairy scheme drawers-up--pie-in-the-sky; never mind who pays. I have not been a member of eight Cabinets and eight public expenditure exercise agonies not to know that you must balance your books and that you cannot ask people to pay taxes or contributions that are unreasonable. But we did try to be honest and open.
	I was shocked when I read in Commons Hansard the other day on, I believe, 6th April the Answer given by the Chancellor of the Exchequer to a Question about the restoration of the earnings link. He said, "But pensioners will be getting £800 million more by the end of this Parliament than they would have done even if we had recreated the earnings link".
	I wanted to get those figures analysed. I succeeded to a certain extent, with the help of our excellent Library. What did I find? I found that a large amount of that £800 million consists of the increased fuel allowances that were welcomed by all of us. No doubt, when the new free TV licences come in for the over-75s in the autumn, they will count as well.
	But the Government have claimed that those fuel payments are to go to every elderly person irrespective of income in recognition of the fact that they are old and need to keep warm. You do not start niggling about whether they are entitled to that or say that if they had saved a bit more they would not be entitled to it. That is what we are doing: we are penalising the thrifty by this extension of means testing.
	What struck me was that the Chancellor of the Exchequer said that this payment, which is due to everybody, is, in fact, to be financed from the denial of the restoration of the earnings link. So all these people who rely on their basic pension, including some of the million-odd people who the Government say are not claiming means-tested support, are the people who are denied the earnings link and, therefore, are paying, in effect, for the fuel concession to all pensioners.
	Why should it be wrong to give the earnings link to pensioners because they will get a fuel allowance, when it is not wrong, in the Government's estimation, to pay that same fuel allowance to everyone irrespective of income? They have not thought it through. They have not seen it as an integrated whole.
	I must not keep the House any longer, but as Lady Turner has said, there will be opportunities at the Committee stage to probe these figures to their very depths in order to try to persuade the Government at least to be logical.
	There is a whole area of SERPS provision that this Government have never understood. Take the carers; you would think that they had just thought up the problems of the carers. It was my government who introduced the invalid care allowance, but more importantly--they never mention this--an integral part of the SERPS pension was the 20 best earning years. The maturity rate was 20 years. You paid all the time you were earning, but the pension could mature in 20 years. In assessing entitlement to pension you could claim to base that pension on your 20 best earning years. Think how civilised that is.
	I remember talking to a leading member of the Carers National Association just before the Government's Bill was introduced and I told her about this. She said, "That would be fine; that would meet most of our needs". Carers are not born in the cradle; they take up caring at a certain point in their lives. The same is true for disabled people.
	I end with this: in the discussions in the Commons, our good friends the Liberals, and Labour Members, made some very good points. One sentence stands out: Angela Eagle, whom I believe is a junior Minister in the DSS, said, "The worst thing that happened for women in the labour market was the abolition of the 20 best earning years". So let us be really civilised, really honest and really logical, as we shall try to persuade the House to be when we come to the Committee stage.

The Lord Bishop of Lincoln: My Lords, I wish to comment on Clauses 61 to 66 of the Bill. They concern the loss of benefit for breach of a community order. I join with the noble Lord, Lord Windlesham, in objecting to them in principle and also in the belief that the measures will be counter-productive in practice.
	The proposals unfairly penalise the poorest and in many cases, the most socially-excluded people in our society. Many studies have shown a strong correlation between poverty and crime. Pushing poor people into even greater poverty must increase their temptation to steal, burgle, solicit or sell drugs. A reduction in non-housing benefit income will directly affect some offenders' ability to maintain their accommodation, which in itself increases the likelihood of re-offending.
	Coupled with the proposals in Clause 46 of the Criminal Justice and Court Services Bill, to gaol offenders who are in breach of a community sentence, the clauses will, if agreed, inevitably lead to a rise in the prison population and threaten further the ability of the Prison Service to improve the education and the possibility of rehabilitation of prisoners. All that seems to conflict directly with the Government's stated intention of bringing down crime rates.
	In addition to those practical concerns, I believe that there are also moral objections to the proposals. As employment statistics show, people from ethnic minorities are more likely than white people to be unemployed. These proposals could therefore constitute indirect discrimination against black people, as defined in the Macpherson report.
	An even more serious objection, as mentioned by the noble Lord, Lord Windlesham, is that the measures amount to double punishment. The courts will retain all their current powers to impose penalties for breaches of orders, ranging from fines to imprisonment, and the withdrawal of benefits will be additional to whatever penalty the court imposes. Moreover, that double punishment will apply only to the poorest offenders because it will not affect offenders who are in work. Inevitably, it will also affect other innocent family members, including young children, through its impact on the total family income. As such, surely it raises a moral question of how society deals with offenders and their families.
	It is wholly wrong that benefit will be reduced before a court has found that the alleged breach of the order is proven. It is like fining everyone who is accused of a criminal offence before they go to court, saying, "Do not worry, we shall pay you back if we find you not guilty".
	I know that the Under-Secretary of State in another place argued in Committee that that measure is an extension of so-called benefit conditionality and not a punishment. However, the requirement that benefit claimants should be willing to co-operate with attempts to find employment is directly related to their need for benefit. If they were in employment, they would either not need benefit or would need benefits at a lower level. There is no direct relationship between breach of a community sentence and the need for benefits to be paid to an individual who has no income. For this reason, whatever is said, the reduction or withdrawal of benefit has a gratuitous element that gives it all the hallmarks of an additional punishment.
	Benefits are, understandably, set at subsistence level. Many probation officers working with offenders would not find it acceptable morally to push them and their families into further debt and destitution. In making the probation officer responsible for sending the appropriate certificate to the benefits office, the legislation undermines and destroys any trust that has been built up between the probation officer and the offender. I should like to remind the House that trust is all-important if effective care and rehabilitation is to take place. I hope that the Government will think again about these clauses. I hope also that I shall be in a position to oppose them in Committee.

Baroness Crawley: My Lords, I welcome this Bill as a further stage in the Government's responsibility to ensure that our welfare system reflects the contemporary needs of our most vulnerable citizens and delivers for them. Despite this being a three-in-one Bill with added extras, amusingly described as a "finger buffet" by the noble Lord, Lord Rix, there is a theme running through it. It is that the welfare system should impact far more fairly and effectively on those with whom it is engaged so that the benefits that they have a right to, or the outcomes of the responsibilities they undertake, as with community service, are fairer, more transparent and more immediate.
	The Bill's measure of success will be if, following the proposed reform of child support, children actually receive the money and practical support to which they are entitled and receive it more speedily with far less bureaucratic obstacles than is currently the case. The Bill will also succeed if the second state pension actually does what it proposes and transfers greater resources to low earners, many of whom, as several speakers have said, are women, and to the long-term disabled--all with broken work records.
	The third major part of the Bill, in the words of the gracious Speech last November, will,
	"reinforce people's obligations to society by linking benefit entitlement to compliance with community sentences".--[Official Report, 17/11/99; col. 3.]
	This proper aspiration will also only succeed if its reinforcement of community sentences is carried out in a way that targets the offender without spreading the consequences of that sanction to those close to the offender who may be innocent of any wrongdoing.
	Several noble Lords who are speaking today made extremely valuable contributions a few weeks ago in the debate I had the opportunity to initiate on child poverty. The whole purpose of the child support section of this Bill is to use the reform of the CSA as a vehicle towards ending the scandal of child poverty. It is not just a case of me, a Labour Back-Bencher, saying that: a number of organisations have written to noble Lords. The Children's Society says that, as a national organisation serving the needs of children and young people, it welcomes the proposed reforms and the child-centred spirit in which they are made.
	As we know, the CSA was established to reinforce the financial responsibility of both parents to their children, whether they live together or apart. However, in many cases that has not happened. Honourable Members in another place have bursting postbags and acrimonious surgeries as evidence of the need for CSA reform. The noble Lord, Lord Higgins, made reference to the acrimony that arises under the current system.
	Under the present system, CSA staff spend 90 per cent of their time doing the assessment calculations and only 10 per cent of their time chasing payments. Only 40 per cent of assessments made are paid in full; and only 66 per cent of maintenance due is actually paid. That is an awful lot of children in need, given that the CSA is currently handling more than 998,000 families. As my noble friend the Minister said, it is expected that more than 1 million children will benefit from the Bill's proposals, many of them receiving maintenance for the first time. That has to be a major step forward in combating child poverty.
	This long overdue reform of the CSA will provide a far simpler system of rates. Levels of liability will reflect a simple percentage of the non-resident parent's net income; families on income support or income-based jobseeker's allowance will be able to keep up to £10 a week of maintenance paid to their children; there will be a tougher sanctions regime so that non-resident parents cannot escape their responsibilities and will be fined for non-co-operation with the CSA; and the new CSA will be far more focused on delivering a service to clients, thereby building up a far better culture of assistance and accessibility.
	The second major section of the Bill upon which I should like to spend a few moments is that relating to the state second pension. As chair of the Women's National Commission, I particularly welcome the fact that those who will gain from the state second pension--the 14.5 million low and moderate earners--will include millions of women. These are women with broken work records, as my noble friend Lady Turner pointed out, and women carers. The Bill should help approximately 2 million carers, as my noble friend Lady Pitkeathley, so graphically outlined, the vast majority of whom are women.
	If women are earning between the national insurance lower earnings limit of £3,432 and the new low earnings threshold of £9,500, we understand that, under the Bill, they will get pension credits as if they were earning £9,500. That will surely go a long way towards pulling down the hard architecture of poverty in old age, which, as we know, is built up over a lifetime by so many women's low and erratic pay patterns.
	If things had been left as they were in 1997, more than two-thirds of women workers earning less than £10,000 a year would have no second pension provision whatever. If nothing were done, very many women would end up as part of the one-third of people in this country who could be left to retire on means-tested benefits alone in the year 2050.
	I believe that this Bill will make a substantial difference in improving the lives of vulnerable children in its reform of the CSA and in opening up far better pension prospects for low and moderate earners, especially women. I therefore welcome it as another route out of poverty.

Baroness Fookes: My Lords, as the noble Baroness, Lady Crawley, reminded us, the noble Lord, Lord Rix, described the Bill as a "finger buffet". I do not look at it as a "finger buffet" at all. To me, it is very much more of a rather vulgar club sandwich, with several disparate layers and far too thick to enable one to take a civilised bite out of it. But, seriously, it shows a disturbing trend that we have seen not only with this Bill but also with others that the Government have brought forward--no doubt they will continue to do so--namely, putting several Bills into one so that we are forced to consider in the time for one Bill what should have been spread out for consideration in three. In other words, we are getting far more legislation even than one might have supposed from one's calculations. I do not believe that this is the right trend; we want less and better legislation rather than the quantity that we are now getting.
	Having made that protest, I now make several points on the Bill. Like the noble Baroness, Lady Castle, I confess that I have not read all the clauses and schedules. However, I have read sufficient to give me concern over certain aspects. I am delighted to note that the Child Support Agency system of payments will be simplified. As a former MP, I saw all too often in my surgeries unhappy women trying to cope with a court system which appeared to be far too difficult for them to manage and which resulted only in court orders that were broken. They then faced the miserable prospect of returning to court, of endless delays and of no satisfaction.
	I believed--and still do--that the principle of the Child Support Agency was a fine one. However, the system was far too elaborate and far too complicated. It caused endless resentment among the fathers who defaulted on their payments. It also caused endless problems for the employees of the Child Support Agency. A regional office of the Child Support Agency was located close to my former constituency in Plymouth. Some of the young women employees at that office were targeted by angry fathers who took photographs of them and recorded their car registration numbers. That was a frightening experience for people who were trying to operate a system that was far too complicated and to carry out a task that was not of their making. I hope that the new system will make their lives easier. No one has mentioned them in the debate today. It is important that we place on record our recognition of the contribution that they have made and of the difficulties that they have experienced. We thank them for what they have achieved and we hope that their lives will be easier in the future.
	I turn now to pensions. I am glad to note that the noble Baroness, Lady Strange, is present as she referred to war widows. I fully share her views on that matter and I look forward to working in partnership with her at later stages of the Bill, when we hope to bring forward a suitable amendment on that issue. I believe that it is important to place that on the record now.
	I was not, of course, surprised, but disappointed, as always, to discover that one matter had been left out of the Bill altogether. The noble Baroness will not be surprised to hear that I refer to the frozen pensions of expatriates who live abroad. Their pensions are frozen when they leave the country. I know what the noble Baroness's reply will comprise as she gave me a frank reply recently; namely, that the cost of meeting the provision I seek would be too high and that there are better ways of spending that money. However, that remark has caused great offence to the pensioner associations with which I am in contact. The House will understand that those bodies see this provision in terms of an obligation which has not been fulfilled and not in terms of some kind of optional decision on the best way to spend money. I hope to return to that also on another occasion.
	I turn to the matter of reducing the benefit of those who breach community service or probation orders. I shall not discuss this in great detail as no one could have given a more masterly exposition of it than my noble friend Lord Windlesham. I agreed with him when he said that this issue was objectionable in principle and probably unworkable in practice. No one has mentioned the people in bail or probation hostels who have to make some payment for their accommodation. Presumably, if they breach an order and their benefit is reduced, they will then be unable to pay for their accommodation. I believe that that is wholly impracticable.
	I urge the Government to reconsider the difficulties that arose when the Child Support Agency was set up with far too detailed a system. I fear that the Government will go down the same road with the measure I have just mentioned. If nothing else, I believe that such a measure could involve clear breaches of the Convention on Human Rights. I have received one or two submissions from lawyers who have suggested that the measure could be in clear breach of certain articles, notably that concerning fair trial.
	Noble Lords have already said that it is unusual, to say the least, to impose a fine or punishment without having first secured a conviction in court. I believe that it would be possible to challenge the measure on that basis alone, although I do not speak as a trained lawyer. I also believe that the measure could be regarded as discriminatory in so far as those in work who breach an order would not be subject to such a penalty as they do not receive benefits but those who are in receipt of benefits would face that additional hazard. I believe that the measure will lead to problems in that regard. I urge Her Majesty's Government to think again about that measure and seriously to consider withdrawing it altogether, or at least to make it available to the courts as a sanction if they see fit to impose it, rather than to introduce it as a compulsory, non-discretionary element.
	Noble Lords will understand my muted feelings on the Bill. I am disappointed by certain aspects of it. However, I hope that in Committee and at subsequent stages we shall make some improvements to it.

Lord Davies of Coity: My Lords, as we all know, and have been reminded in the debate, this is a lengthy and comprehensive Bill. It embraces child support, pensions and social security--all matters of fundamental importance to nearly everyone. It is a Bill which reflects the enormous changes that have taken place in our society. It addresses not only the problems that face us now but also anticipates the problems of the future if nothing is done now. It is a Bill which I am sure we can all generally support in principle, even if there are differences as regards the means by which the fundamental objectives of the Bill are achieved.
	The eradication of child poverty and the building of the foundation for security in retirement are undoubtedly aims with which no one can quarrel. These aims are precisely what this Bill seeks to achieve. The Bill will help to ensure that pensioners have a life to look forward to. It is also designed to provide more support and greater opportunities for children. The Bill sets out clear responsibilities for working adults, as well as promoting rights for them.
	In addition to reforming the system of child support, introducing the state second pension and introducing disciplines in respect of community sentences and benefit entitlement, the Bill also addresses occupational and personal pensions; the powers of fraud inspectors; housing benefit overpayments; national insurance contributions on benefits in kind; and war pensions--all issues which need legislative attention.
	Times have changed and circumstances have changed. If our welfare state is to mean anything in the 21st century, it must also change. I compliment the Government on their vision and courage on embarking upon this programme of change which is not only desirable but also necessary.
	However, I intend to concentrate on the child support aspect of the Bill. Children are the ones least able to speak for themselves, but they are the ones who will inherit the future and they are the ones who will determine what that future will be like. Therefore, apart from our moral obligation to do all that we can to support and to protect our children, we must also do so if we want the future to get better and not worse.
	We know of all the problems that have arisen for children born outside marriage--particularly those from teenage pregnancies--and of the enormous increase in one-parent families. In the main, this has meant a considerable struggle for the sole parent bringing up the child or the children, the overwhelming and vast majority of whom we know are women.
	In an effort to get the absent parent to accept responsibility for the child or children he has fathered, the previous Government introduced the Child Support Agency. We do not quarrel with that concept, but we must recognise that it has not been working. The current system is complex and complicated. Some 90 per cent of the time of staff is spent on doing sums and 10 per cent on chasing payments; only 40 per cent of assessments made are paid in full; and only 66 per cent of maintenance due is paid. This cannot be right.
	That is why the Government are proposing to simplify the system under which the Child Support Agency works. Through this Bill, an absent parent--described as a "non-resident" parent--will pay a percentage of his net income to support the child or children he has fathered. The Bill also provides for reduced rates for those on low incomes and more help for the poorest of parents. Through these provisions it is expected that more than 1 million children will benefit from the new system, with many of them getting maintenance for the very first time. These must be measures that we can all support. Children have a right to care and parents have a responsibility to provide it. If a father does not voluntarily fulfil that responsibility, then in the interests of the child the state must impose it.
	When I was a young man--I am sure that most of your Lordships' House will remember this--if a lad got a young girl "into trouble" or "in the family way", as I recall the circumstances were described, fulfilling his responsibility by getting married was done without a second thought. Although that may no longer be the case, a father must accept responsibility for the child he has fathered; hence the reason for the establishment of the Child Support Agency. Whatever sympathy we may have for parents, absent or otherwise--as indeed expressed by the noble Earl, Lord Russell--let us not forget that our duty is to the child and to the children; the child must come first. Child poverty must be removed; bureaucracy dramatically reduced; and maintenance paid and provided more quickly.
	This is what this Bill is about--and the quicker it becomes law the better. My only regret is that it appears that, because of legislative and operational timetables, the introduction of these provisions will not take place until the end of 2001. So the quicker we deal with the Bill the sooner children will benefit.
	In conclusion, I should like to share with the House a recent experience that I am so pleased to have had. Last Friday afternoon my wife and I were invited to the primary school in our village which four of our grandchildren attend. We were invited as grandparents. Two classes of six year-olds, one of which our granddaughter attends, were putting on a performance for their grandparents, singing and individually expressing their feelings and love for their grandparents. We were provided with tea and cakes. It was a wonderful afternoon. In these two classes--this is the point--there were fewer than 60 children, but what was so wonderful is that there were nearly 200 grandparents there. I am sure that the House can imagine the amount of emotion generated.
	I know that these children are having a wonderful start in life--in their school, in their homes and in the community in which we all live. I wish that every child could have such opportunities. I believe that this Bill, along with other programmes and measures being brought forward by this Government, will do a great deal more and provide greater opportunities for all the nation's children in the future.

Baroness Howells of St Davids: My Lords, in speaking to this Bill, I confess to a certain crisis of identity. I share most of the views of the noble Earl, Lord Russell, on the CSA as an organisation; however, I welcome the proposed reforms envisaged in the Bill, especially the child-centred spirit in which they have been suggested.
	The introduction of the child premium, not in the Bill itself but in the White Paper on children's rights and parents' responsibilities, must be seen as both a vital and a tangible expression of the Government's commitment to putting children at the centre of all child support reforms and to abolishing child poverty. The Government's introduction of a simple formula for calculating child maintenance is certainly to be welcomed.
	However, the Government's claim that they are giving more help to the poorest parent falls short when they speak of tougher sanctions against those who do not comply--for example, by making withholding information a criminal offence, with fines of up to £1,000 and a late payment penalty. In itself, it seems only right and proper that those who do not comply should be penalised. But I should like the Minister to pause for a moment to consider what the reasons may be for those who may fail to comply--for example, those who have been raped; those who have had accidents which have resulted not from a stable relationship but from other forms of unsociable behaviour; those children who have children themselves; those 13 to 15 year-olds who have been raped by fathers, stepfathers or older relatives who may themselves be drug addicts. No one would suggest that such persons should be protected, but, life being what it is, these young mothers have to bear a cross in silence, often to protect those whom they love, who are their nearest and dearest and who could be hurt beyond repair. To penalise them in this way may impose greater poverty.
	I believe that the Government are truly trying to eradicate poverty, but we have only to read the papers to see what can happen in some cases when vulnerable children with children are forced to name the father of their child. I have known of cases where the stepfather has been gaoled for six months--rightly so, I am sure your Lordships will agree--but the young mother is made to feel so guilty that her life and that of her child become untenable. I shall not bore your Lordships by speaking of cases where these young mothers have been forced either to give up their children or to flee with their children to places of safety--not from the man responsible for the pregnancy but often from their own mothers, aunts or cousins, whose loved ones, in their eyes, have been put in gaol because of this unsociable behaviour. I urge the Government to put in train a safety net for those unfortunate children before seeking sanctions as the only way forward.
	Several surveys have shown that many lone parents are surviving at the edge of a basic existence. Family and community support systems are fragile. Despite these difficulties, lone parents have the desire to change and return to work.
	We must, as a Government and people with responsibility, provide conducive circumstances and, more importantly, affordable childcare which has the flexibility to enable those lone parents to return to work, to know that their children are looked after and not to be dependent on state aid.
	The penalty proposed will not only delay the return to work but may lead to child neglect among the most vulnerable in our society. Sometimes when we make laws we forget that there are centigrade people and fahrenheit people, the same, but having very very different circumstances. I shall not take time to explain to your Lordships what I mean by centigrade and fahrenheit people because I think you will know yourselves if you think about it.
	Finally, in Clause 10, on the subject of appeals, in the interests of a fair and just process I would suggest that tribunals set up for any such appeals should be headed by at least three persons, of whom one should be of the same sex and one should certainly be of the same ethnic group as the qualifying person, to make such judgments. Our different ethnic groups have very different positions in this society.

Baroness Byford: My Lords, in my maiden speech nearly four years ago I spoke about the role of voluntary organisations and the work they do in today's society. I mentioned the WRVS and their work in running centres for families and as a place for visiting parents, usually the fathers, where they could come together to meet their children on neutral territory.
	In an ideal world parents would work through their difficulties and remain together. However, this is often apparently not possible and instead means have to be found to ensure that the absent parents remain in touch with the children and help to support them. Equally, the parent with custody rights has to be encouraged to ensure that the children are able to meet the absent parent regularly. As other noble Lords have said, that is often the father.
	I can imagine little worse in an already fraught situation than to have to grit my teeth and wave the children a brave goodbye as they trot off to meet an absent parent who pays little or nothing towards their support or who regularly fails to pay on the due date.
	The Child Support Agency was intended to make the lot of those with the responsibility of care easier to manage. As it stands, and as others have said, the accumulation of the information necessary to decide the level of payment takes, I believe, 90 per cent of the time available, leaving only 10 per cent for enforcing the ruling. This is clearly not enough, especially as about one-third of absent parents--usually the fathers--refuse to co-operate with the agency.
	I am sure we are all agreed that reform is necessary. Biological parents must take responsibility for the children they beget. The formula to be used in deciding the form and level of that support should be simple but, I believe, flexible. The administration system should be direct and effective. The time taken from the receipt of request for help to settlement should be comparable with the targets set in other areas of professional life--for example, in the treatment of major illness in hospital.
	The recent employment of the private sector in the provision of advice on debt management and in the collection of overdue moneys is to be welcomed. However, the Government's proposal to establish new specialist inspectors to obtain information from employers and the self-employed needs very careful consideration. It suggests that they have in mind a formula which will be based on the assessment of ability to pay rather than on the assessment of the child's need followed by the hearing of an appeal that may be brought by the absent parent.
	In his thoughtful contribution to the Second Reading debate in another place, Frank Field highlighted the formula as an area of concern. He also said that the proposed rates are set too high and that the moneys due should be collected by the Inland Revenue and not by the social security agencies. In the same debate Anne McIntosh raised the question of whether overtime payments should be taken into account in calculating the sum due. Jeff Rooker, in response, was of the opinion that it should be where it was a regular part of the income. Perhaps when the Minister comes to respond, she might enlarge upon the Government's thinking in that area.
	I should like to suggest that that argument should be left to an appeal panel to decide. I was interested to hear what the noble Baroness, Lady Howells, has just said. Many absent parents are only too willing to help support their children. They want to be assured that the level of support is fair and is comparable with what others in the same position are paying. If they have to work overtime to meet the required sum they will do so. Why spend time and effort trying to meet trouble where there is none?
	While I support the need for reform, I am seriously concerned at the volume of detail which has already entered the debate. It may well be that we shall need to look at it again more closely when this issue comes up before us at committee stage. It has been suggested that were the formula simpler it would be seen as fair by the vast majority or parents. Were this linked with a simple appeal system, along the lines perhaps of a small claims court, only a relatively small proportion of parents would feel constrained to use it. The net result would be a considerable reduction in the amount of dissension generated by the system and the children would obtain the benefit earlier.
	I would also like to suggest that--just as having a named nurse when in hospital--it would be sensible to have a named official in charge of each of the CSA claims. This might speed the agreement between the warring parents. My suggestion is that it should be the same person who would deal with both sides, the male and the female concerned. Surely, this would be aided if that named individual were clearly responsible for listening to both sides of the argument within the family debate. Perhaps a simple formula, an easy-access appeal system and a named official would reduce the need for sanctions against non-co-operative parents. Where the argument is about money and what can and cannot be afforded, it seems self-defeating to talk about fines of up to £1,000 and the removal of driving licences when so many people cannot work without a car. Indeed, that point has been echoed by many speakers in the debate. Surely, if there is to be an ultimate sanction, it would make much more sense to consider removing someone's passport than their driving licence.
	This Bill deals with a multitude of subjects, including the number of benefits, national insurance contributions and that well known catch-all "miscellaneous". However, I shall confine my remaining remarks to a few words on pensions. At Second Reading in another place, the Secretary of State said:
	"We are helping some 4.5 million low-paid people, 6 million moderate earners, 2 million carers and 2 million disabled people with broken work records".--[Official Report, Commons, 11/1/2000; col. 161.]
	I have added that up and it totals 19.5 million people who are to be helped by this Bill. Will the Minister assure me that my mathematics are correct, because that is one-third of our population who will be helped if this Bill is passed?
	I refer to something my noble friend Lord Higgins mentioned about the actual payment of benefits to people, whether they are in the form of pensions or of welfare payments. I have looked carefully in Hansard at the responses of the noble Baroness, Lady Hollis, to the various questions. While I accept that the Government are looking at different ways, I did not see any final decision as to what method will be used to pay these benefits--will it be by Giro or by a card?--if they are to continue to be paid through the Post Office.
	Finally, am I the only person wondering whether it would not have been simpler to require everyone, earning or not, to contribute to the state pension; and whether it would not have been simpler to carry out a radical review of the rules for crediting contributions? Would it not be possible to use the mobile phone licence bid money--I understand that that is likely to amount to several billion pounds--to convert the state pension scheme to being partially funded? At the same time, I feel that the Government should look very carefully at the system of annuities. At Second Reading in another place, the point was made that low inflation, low interest rates, an increase in private pension money in the market and a lack of gilts on offer will drive annuity rates even lower.
	This Bill comes at a time when, in the pecuniary sense, the Government can afford to think laterally. I hope that during the passage of the Bill we shall be able to persuade them to do so.

Lord Christopher: My Lords, I fully support the principles of the Bill. There are some loose ends which I hope can be tidied up, but I do not wish to deal with them. I seek to address the question of pensions and, in particular, the national state pension, to which a number of noble Lords have referred.
	The noble Earl, Lord Russell, said that we can only start from where we are. I cannot quarrel with him over that. But it is sometimes interesting to find out the route we took to get there. I was particularly impressed by what the noble Baroness, Lady Castle, who is not in her place at the moment, had to say. I would wish to take the noble Baroness back to the early 1970s, when it was at last beginning to dawn on people that the post-1945 situation of social security and benefits was in grave danger of running slightly out of steam. At that time, Anthony Barber, as he then was--the noble Lord, Lord Barber, as he became--produced a Green Paper on the concept of a negative income tax. The union of which I was then an assistant general secretary--the Inland Revenue Staff Federation--supported that proposal in principle. The proposal certainly had two serious faults. The first was its huge cost and the second--perhaps because of the first--was that the numbers gave the shifts of income not from the middle ranking paid people to the lower paid but the other way round.
	The strongest opponent of that paper was probably the noble Baroness, Lady Castle. With the help of Lord Kaldor--Nicky Kaldor as he then was--a highly respected economist, she was successful and the Green Paper disappeared into limbo. It has taken almost 30 years for anyone to go back to that thinking and try to see whether there did not lie in it some assistance towards the serious problems which we currently face.

Lord Higgins: My Lords, by way of an historical footnote, the proposal had gone rather further than a Green Paper. We did in fact have a draft Bill prepared. It was only because we lost the election that it did not come forward. As the noble Lord rightly implied, it would have involved spreading the cost over a considerable number of years before it could have been fully implemented. It was a committee in the new government, including the noble Baroness, Lady Castle, which killed the idea. It took a very long time to get it there. But we had every intention of legislating had we not been so unfortunate as to lose the election.

Lord Christopher: My Lords, I am not at all sorry that I allowed the noble Lord to intervene. That was a fascinating piece of history, although I do not share the noble Lord's feelings about who won the election.
	The cost of the state pension today is £30 billion, which is 10 per cent of GDP. We are all aware of the range of expensive demands being made from all round this House, from the other place and in the press for a great deal more expenditure elsewhere. The proposals in the Bill will add £5 billion to that cost in current terms by 2050. The noble Baroness, Lady Crawley, gave us a somewhat bleak picture of what would have arisen in about 30 years' time had the Government not taken this problem by the scruff of the neck and attempted to do something about it. Alistair Darling has produced a formula which is of considerable assistance. As I said in the House some time ago that no one since Lloyd George has ever got pensions right, I am certainly not going to give Alistair the benefit of actually conquering all, because I suspect that he has not. We are on something of a learning curve.
	Some people feel that the only solution to the problem is to increase the state pension. I cheerfully acknowledge that it is unlikely that it is going to many really wealthy people but it is certainly going to a great many people who, strictly speaking, are not in that need. I declare an interest. I am one. No one has offered a solution beyond that--not even from the Opposition Front Bench. I suspect that the noble Lord, Lord Higgins, did not offer a solution because the integrity which he has displayed over so many years and which I have respected would scarcely allow him to do so given Mr Portillo's proposals for reducing taxation.
	Even though the minimum income guarantee is to be linked to earnings, my advice to colleagues is to tackle that. There is nothing I have seen in the papers that we have received over recent months to suggest that an earnings-related link is the sole link or that something special could not be done. Reference was made to the winter payments and to the television licence assistance being given globally to those who qualify by age. I suspect the answer is that there is no other way of doing it. No one has yet come up with a refined system which will permit that degree of discretion.
	I hope that we can proceed to support the Bill and deal with some rough edges. But, certainly on the central theme, I hope that we can hold to it.

Lord Brookman: My Lords, nearly every speaker has agreed about the importance of the Bill, albeit some noble Lords have said that it is difficult to follow its every detail. From my perspective, the Bill deals with the Government's broad welfare reform agenda and its general thrust is to be welcomed. However, an area of concern to many--this point has not been raised in the debate--is the issue of pension schemes and the proposed arrangements in Clauses 42 to 45 to change the way in which member trustees are nominated to the trustee boards of those pension schemes. This point may not raise as much emotion as some of the key areas of the Bill that have been discussed today but it is very important.
	Pension schemes are now high on the agenda of working people. That was not the case in my younger days when starting employment but it is so now, and it is right that it should be. Trade unions ensure that pension schemes are high on the negotiating agenda with employers. Trade unions and their members regard pensions and pensions contributions as deferred pay.
	I should like to share with the House the concerns of pensioners and their representatives relative to company pension schemes and Clauses 42 to 45. The Pensions Act 1995 introduced a requirement for member-nominated trustees in occupational pension schemes. The good intentions underpinning the Act in that area were soon undermined by the numerous opt-out opportunities that were provided for employers to avoid the scrutiny that a member trustee can provide to a pension scheme. I am very pleased that the Government intend to change the position.
	I now turn to the concerns that I want to express. Early indications suggest that the new structures may have limited value for one section of members in company pension schemes; namely, the pensioners themselves. From my own experience, pensioners nominated as trustees can, and do, provide a welcome knowledge and a high level of independence which are invaluable. Under the Bill, amendments to Section 16 of the 1995 Act would provide a framework that would allow trustees flexibility over certain aspects of nomination and selection. It is feared by many pensioners that the prospect for pensioner representatives could be few and far between if trustees are themselves allowed to allocate the majority of member-nominated seats. In other words, would it not be the case that active members would nominate other active members, and that other classes of members would be excluded? That is the genuine concern of pensioners receiving payment from company pension schemes and of pensioner organisations. What pensioners want is proper representation as trustees, not under some grace and favour arrangement but in their own right. I share their view, as I hope does my noble friend the Minister.
	Perhaps my noble friend will be good enough to reply to the following questions and concerns. Does she agree that pensioner trustees would add value to the deliberations of trustees and that they would add a voice of independence? Will my noble friend ensure that pensioners are given equal treatment in the nomination and selection process? Finally, does she share my view and that of many others that the requirement for 10 per cent--which could mean 10,000 objections--to register opposition to employers' proposals is excessive, particularly in regard to large schemes?
	I am sure the House very much wishes to hear my noble friend's comments on those points. In replying, I hope that she will satisfy the current concerns of pensioners and others regarding pension schemes.

Baroness Greengross: My Lords, I am pleased to have an opportunity to speak in this debate. I shall concentrate mainly on issues relating to state pensions.
	The Bill introduces the state second pension. I very much welcome the principle of crediting in those with low earnings or who are unable to work due to caring responsibilities or disability. However, I am concerned that the level of the state second pension, when added to the basic pension, will not be enough to provide a decent income in retirement for everyone.
	The DSS report, Opportunity for all, gives an example of a woman who spends her life on low earnings or caring for young children who, in 2051, would have a total pension of £84 a week from both the basic pension and the state second pension in relation to today's earnings. Recent research by the Family Budget Unit commissioned by Age Concern suggests that that is not enough to avoid living in poverty and that it is a long way off the £150 a week, the minimum amount in total that is needed for a modest but adequate standard of living in retirement. To address that problem, both the level of the basic pension and the level of the state second pension will need to be higher.
	While the state second pension will help people in the future, there is also a need to address the urgent problem of today's pensioners. The Government have already made some welcome improvements; for example, increasing the minimum income guarantee and other means-tested benefits for people of 60 or over and proposing to increase the capital limits quite generously from April 2001.
	However, many older people who have struggled to build up savings or additional private pensions feel penalised for having done so, while others who would like to work part time are deterred from doing so because they would lose benefit. The Government have said that they will consult on a pensioners credit to reward work and saving, and I look forward to hearing further about this.
	One major problem is that there is no official assessment of the actual needs and living costs of older people on which to assess the adequacy of current benefits and pensions. In order to address that, I should like to see the Government developing budget standards. The Family Budget Unit's report, Low cost but acceptable incomes for older people shows how these can be developed and indicates that current pension and benefit levels are not high enough to enable all older people to avoid living in poverty.
	I have already referred to the importance of looking at the assessment of savings and income to ensure that people do not feel penalised for having saved. However, above all the Government must recognise the importance that older people place on having a basic non-means-tested pension and the anger there has been at this year's 75p increase. The level of the basic pension needs to be improved to act as a true foundation on which to build up additional income in retirement.
	I now turn to Clause 38 dealing with inherited SERPS. As is now well known, the 1986 legislation would have halved SERPS for people widowed on or after 6th April. Most people were unaware of the change and some received wrong or incomplete information. On 15th March, the Government announced that they would delay the change to October 2002 and introduce a protected rights scheme to provide redress for people who have been misinformed.
	Speaking in this House, I welcomed the Government's recognition that they must take responsibility for addressing this difficult situation, which is not of their making. However, I expressed some concerns about how a protected rights scheme would work in practice and whether everyone affected would find their spouse's financial position secure. On considering the matter further and hearing the comments of many people who have contacted Age Concern, I am afraid that my concerns are increasing rather than decreasing. The change has been delayed for two and a half years--that is welcome--but in the mean time it leaves people worried and uncertain about their position. One man wrote to Age Concern stating,
	"continuing the uncertainty is a constant source of distress and erosion of our lives".
	The onus of proof will be on the DSS. Yet it will still be up to individuals to make a claim; to show that they were given incorrect or incomplete information; to show that they relied on that information; and to show that otherwise they might have acted differently. Many still do not understand the situation. Others may well find it difficult to fit the rules of the scheme because they did not seek out specific information and assumed that the rules had not changed.
	I am concerned that those most likely to benefit are those who are well educated, well informed or who have access to good advice and support. Most worryingly of all, however, there is a danger that the scheme will benefit those people who are prepared to be dishonest. Others less able to cope with applying or who, for example, honestly state that they cannot quite remember exactly when they contacted the Benefits Agency and everything that was said, may lose out. For those reasons, a delay of two and half years and a protected rights scheme are an inadequate response to a very difficult problem. I shall return to that matter at a later stage.
	I fully endorse the observations of the noble Lord, Lord Brookman, and others about ensuring that pensioner members are represented on trustee boards. In view of the default procedures, although the Bill improves the situation it does not necessarily go far enough. I hope that the Minister can reassure the House that the strengthening of the Pensions Act 1995 will go far enough to ensure the involvement of the correct proportion of pensioner representatives.

Baroness Kennedy of The Shaws: My Lords, I speak to Clauses 61 to 66 in Part III of the Bill which provide for a reduction in welfare benefits, or their withdrawal, when an offender breaches a community sentence such as a probation or community service order. I believe that these provisions are in breach of human rights law and our commitments under a number of other international conventions. The measures are retrograde and counter-productive and are bound to increase crime. To push poor people into even greater poverty must increase the temptation to steal, burgle, shoplift, solicit for prostitution or sell drugs.
	The noble Lord, Lord Windlesham, spoke of a fundamental objection to the Bill. I agree. These changes create an unacceptable cross-over between the welfare system, which is based on need and entitlement and the duty of the state in any civilised society to keep people above subsistence level, and the criminal justice system. I understand that the measure is to be piloted in a number of areas, but that provides little consolation when the change in law means such a departure from principle and creates a double penalty for the poorest in our society.
	The clauses provide that the penalty of reduced benefits will begin when the benefit office receives a notification from the probation service which confirms that an offender may be in breach and is being brought back to court. It is, surely, wholly wrong that the benefit is to be reduced before a court has found that the alleged breach of the order is proven. Reductions will begin as soon as the offender is referred back to court, but we are supposed to be consoled that there will be a repayment of arrears if the court finds that no breach has occurred. As the noble Lord, Lord Windlesham, said, this is the novel idea that punishment precedes trial. I hope that that does not creep into other parts of the system. It is a bit like fining everyone accused of a criminal offence before they go to court and telling them not to worry because they will be paid back if they are found not guilty. Probation officers should comply rigorously with the regulations in bringing people back to court for breaches, but a dreadful moral pressure will be placed on officers if they know that to report an accused for a second failure to attend will add to that person's social problems and poverty and possibly increase crime.
	A matter of serious concern is the differential impact of these proposals. They will apply only to offenders who receive benefits and there is no equivalent sanction for those in work. Withdrawal of benefits will be additional to another penalty imposed by the court. This will be a double punishment applied selectively to the poorest offenders. The extra punishment will seriously affect other innocent family members. The unemployment rate for black males is higher than for white males. Thus, black males will be over-represented in the group of offenders liable to a withdrawal of benefit. That will feed into perceptions about the unfairness of the criminal justice system.
	These clauses will also impact disproportionately on women. Many courts already face problems in finding suitable sanctions for women, particularly poor ones who cannot pay fines. Often the tariff for women increases. Women may find themselves on probation when such an order would not normally be imposed for the particular offence. These women often have children and therefore have problems in attending. Undoubtedly, the loss of benefit will place enormous pressure on them. Even if a woman is able to persuade the court that there was a good reason for her failure to attend, imagine her problems in the weeks in between in having to manage on significantly less money and go through the process again of obtaining the right entitlement so that the money is put back into her purse.
	In opening, the Minister spoke of her serious intent to meet the challenge of child poverty in our privileged society. These measures will add to the problems of children. Loss of benefit impacts on whole families. Research shows that, even where the offenders are adult males, very often they will meet their own needs from the available income and women and children will be left to manage on what is left. If these clauses come into effect, they are likely to visit serious problems upon women and children.
	I am glad that the noble Lord, Lord Windlesham, spoke about the Jesuitical claim that this is not a double punishment but another instance of "benefit conditionality". It sounds like another example of economy with realite. It is becoming unfashionable to speak of matters of principle, but I am an old-fashioned girl. When some of us speak out on matters of principle we are derided for expressing such concerns. It is cynically suggested that we must be looking after a vested interest. When lawyers in this House expressed concern about reducing the right to trial by jury it was suggested that they sought to look after their own interests. When the trade union leader, Bill Morris, suggested that there was a risk of inflaming racism because of changes in the laws on asylum it was said that he sought to look after his trade union members who were truck drivers. I do not expect such cynicism from the Minister. This is a matter of principle. I hope that the Government will think again about proposals which do not conform to the principles of justice and which diminish the honourable intentions of many parts of the Bill.

Lord Haskel: My Lords, I am sure noble Lords agree that, looking back over the past three years, one pattern that stands out is the Government's consistent attack on poverty, to which my noble friend Lady Pitkeathley referred. There has been an attack on poverty in the developing world by the cancellation of debt. Closer to home, there has been an attack on poverty at work by the introduction of the minimum wage and the working families' tax credit. There has also been an attack on child poverty by increases in child benefit and child support in this Bill, as my noble friend Lord Davies reminds us. Further, there has been an attack on the poverty of those not in work with the New Deal and the dismantling of the poverty trap. Pensioner poverty has been attacked by the introduction of a minimum income guarantee.
	In this Bill, we now have an attack on future pensioner poverty with the introduction of the second pension. I welcome that consistent and determined attack to break the cycle of poverty which diminishes so many lives. It is that part of the Bill which deals with pensions and pensioner poverty that I should like to explore.
	It is obvious that the poorest pensioners are those on low pensions who have to rely on benefits. We are all aware of the unfairness and indignity of working hard all our lives and, on reaching retirement, having to exist on benefit, means-tested or otherwise. I do not want to get into that argument. As the Minister said, if no action is taken, the present system means that one-third of working people are destined to retire on benefit. Clearly those people are destined to be the pensioner poor. I therefore join other noble Lords who welcome the state second pension. It will mean that everyone earning £9,500 in a year, and who pays into the National Insurance Fund, will be treated as though they had earned £9,500--a kind of minimum wage for pensioners.
	I approve of the idea because most of those earning a low wage are not doing so deliberately to exploit the system. Circumstances force it on them--caring for children or elderly relatives; disability or illness; or changes in the economy affecting their work. This broken pattern of work can take up many years and, indeed, can affect the 20-year rule for SERPS.
	The state second pension will, therefore, give these people the pensions that they would not otherwise receive, and they will not have to rely on benefit, which is clearly unpopular and difficult, judging from the nearly 1 million pensioners who do not claim the benefit to which they are entitled.
	What about uprating the state benefit instead? In a way, the state pension has already been uprated with the minimum income guarantee. But as is clear from the figures given by my noble friend Lord Christopher, the truth is that there may be some encouragement to move to the private sector for pensions. I do not object to that; it is a sign of the times. Apart from the National Health Service, many aspects of service provision have been transferred to the private sector--I refer to utilities and to transport--all with a regulator to protect the public interest; such is the age in which we live.
	Some have argued that the scheme is unnecessarily complex. Perhaps the reason for its complexity is to make the scheme flexible enough to allow people to move into occupational or personal pension schemes and to take the benefits of the second pension with them. This, too, is of particular interest to women whose earnings and circumstances fluctuate more than those of men. The scheme must be flexible enough to accommodate that. Who knows what will happen in the future?
	Some noble Lords have said that it will take a long time for the scheme to have an effect. Some have spoken of backdating. Such an observation is more about pensions in general than this scheme in particular. The very nature of pensions is that any new scheme can be introduced only for people whose major part of their working lives is still before them. Of course, an occupational scheme would be far better but that is out of the reach of many people. This scheme ensures that those who have worked hard all their lives but whose earnings, for various reasons, have been low or intermittent will receive sufficient pension to retire at above the minimum benefit level. They will not be part of the pensioner poor. It is a good deal for those on low pay; and I welcome it.
	The Bill deals also with other aspects of occupational and personal pensions on which I should like to comment. I declare an interest as trustee of a pension fund. Like my noble friend Lord Brookman and the noble Baroness, Lady Greengross, I welcome Clauses 42 to 45 which require that at least one-third of the trustees of pension funds must be nominated by the members. My noble friend Lord Brookman reminded us that under the Pensions Act 1995 employers could make alternative arrangements which meant that no members of a pension scheme were trustees. Quite rightly, that provision has now been removed.
	One reason for the absence of member-nominated trustees was that no members were qualified; they lacked the knowledge and skills to understand pension schemes. I agree with my noble friend Lady Turner that the new arrangement emphasises the importance of training schemes for pension trustees--not least to learn the jargon. Such schemes are essential in order that members may be independent and effective trustees. That is the lesson of the Maxwell episode. I hope that the Government will draw attention to the work of the pension education working group and to the responsibility of the Financial Services Authority to promote financial literacy. Of course, the Financial Services Authority is not obliged to advise on different pension products, but it is obliged to promote understanding. I hope that the Minister will ensure that it does so by studying that section of the authority's annual report.
	I also welcome Clause 51 about the annual benefit statements sent to members of occupational and personal pension schemes. Most statements about these schemes detail the amount of contributions paid and the current value of the fund. But what people really want is a clear statement of the likely value of their pension at retirement age.
	I welcome the requirement that each statement should be accompanied by a calculation forecasting the value of the pension at current prices. It will be combined with a statement giving the state pension rights. People will then have a full picture of their financial situation at retirement. The purpose is to flag up problems in advance. If the amount is too little, the time to do something about it is while people are working, not when they retire. These are two measures in the Bill which I think will help to clarify some of the mystery surrounding pensions.
	My final point concerns Clause 40. This clause deals with the "Hollis split". The "Hollis split" is not some exotic ice cream dessert; it is the sharing of pensions on divorce. I call it the "Hollis split" because this little bit of social justice is largely due to my noble friend the Minister. In 1995 I supported my noble friend when from the Opposition Front Bench she moved amendments about pension splitting on divorce and was told categorically that it was actuarially and administratively impossible. When she moved to the Front Bench on this side of the House she introduced a draft Bill in 1998, and legislation on pension sharing was included in the Welfare Reform and Pensions Act 1999.
	Clause 40 of this Bill tidies up some of the detail and consolidates the principle of the "Hollis split". This achievement is a tribute to my noble friend's grit, vision and determination over the past five years. I hope that noble Lords will join me in congratulating her.

Lord Goodhart: My Lords, I start by agreeing with the noble Lord, Lord Higgins, and the noble Baroness, Lady Fookes, that this is not one Bill but three, as was last year's Welfare Reform and Pensions Bill. That is true to such an extent that my noble friend Lord Russell and I have had to enter into a job-sharing agreement. As he explained, he will deal with the child support and social security aspects of the Bill; I shall deal with pensions and national insurance contributions contained in Parts II and IV.
	However, before turning to those parts of the Bill, I should like to state our entire agreement with what has been said today by the noble Lord, Lord Windlesham, the right reverend Prelate the Bishop of Lincoln and the noble Baronesses, Lady Fookes and Lady Kennedy of The Shaws, on the withdrawal of benefits from those in breach, or, even worse, alleged breach, of community orders. The principle is the same as the withdrawal of driving licences from those who are in breach of their child support obligations, although to a more serious level. I am sure we all remember a song from the "Mikado" about the punishment fitting the crime. These punishments emphatically do not fit the crime. They are gimmicks; but they are dangerous and I believe illegal gimmicks.
	The main function of Part II of the Bill is to introduce the rules governing the state second pension which we were promised last year. Last year we dealt with the first part of government reforms: the stakeholder pension. No doubt during the course of further stages of this Bill there will be further discussion on some aspects of stakeholder pensions. This year, we shall get the state second pension.
	I summarise how, as I see it, the pension will work. It will be implemented in two very different stages. At stage 1 the state second pension is a modified version of SERPS, the main modification being that those who earn less than £9,500, which is described as the lower earnings threshold, are treated as having earned £9,500. We are told that all people with earnings under £21,600 will do better under the state second pension than under SERPS, and those with the lowest earnings will, in percentage terms, do best. Those who have, throughout the year, received the care allowance, have had home responsibility for a child under the age of six or have been in receipt of IB will be treated as though they have been earners with earnings at the lower earnings threshold. All those provisions are, indeed, to be welcomed.
	At stage 2 the state second pension changes its nature, like a butterfly emerging from a chrysalis. It will become a flat-rate pension, with a pension based on whatever the lower earnings threshold is at the time of the changeover. Stage 2 will be introduced at some uncertain future date when, we are told, the stakeholder pension is up and running. However, at both stages 1 and 2 an earner can opt out of the state second pension and can obtain a rebate of his or her national insurance contributions which can be put into a stakeholder pension or an occupational or personal pension. That will be particularly important at stage 2, when anyone who earns much above whatever the lower earnings threshold then may be will be significantly better off by contracting out.
	As I understand it, the lower earnings threshold will be earnings-linked and the earnings factors derived from past years of contributions will be uprated in line with earnings. That means that the starting point of the state second pension for new pensioners will be uprated annually in line with earnings. However, once the state second pension becomes payable to a pensioner, the pension will increase only in line with prices. That means that if the minimum income guarantee increases in line with earnings, as is proposed, the state second pension for any given pensioner could start above the MIG level but could fall below it over a period of years.
	The new pension system is, indeed, ingenious. It has many good features. When fully operational, the state second pension should lift everyone with a full contributions record above the minimum income guarantee, at least at the beginning of their retirement. It contains a considerable amount of redistribution and particularly benefits those who are on low earnings or who are unable to earn because of caring responsibilities or incapacity. However, it is fiendishly complicated, and that is a serious problem.
	I believe that it will be a particular problem when employees have to take the decision whether to contract out or to stay in the state second pension. That will be very important at stage 2 when the failure by people who earn significantly more than the lower earnings threshold to contract out will have a seriously damaging effect on their pension rights. I should like to ask the noble Baroness how the Government intend to ensure that people who need to take that decision will be properly informed about the advantages and disadvantages of contracting out. If there is no proper information, we risk the third great pensions mis-selling scandal.
	I believe that there is scope for simplification at stage 2. At that point, the basic state pension and the state second pension, or what is left of them, will both be flat-rate pensions. It would simplify pension arrangements greatly if at that stage the basic state pension, or what is left of it, and the state second pension could be merged into a single state pension with the right for employees to opt out of part of the pension and receive a partial rebate of contributions to pay into stakeholder or other private pensions. I wonder whether the Government have given any thought to that as a longer-term possibility.
	I hope that we shall be able to move on to stage 2 fairly soon. I believe that the main problem with the state second pension is its slowness of implementation. On present form, it will take approximately 45 years to reach maturity; that is, to reach the point where everyone who is retiring will be entitled to a full state second pension if they have a full contributions record. Until then, they will have to rely on a mixture of SERPS and the state second pension.
	As my honourable friend Professor Steve Webb pointed out in another place, no pension system yet invented in this country has survived for more than about 20 years. Therefore, it may well be that the state second pension will never reach maturity. However, until the state second pension reaches maturity, the pension improvement is inadequate; indeed, as I understand it, under the present proposals the poorest pensioners will be approximately only £1.30 per week better off in real terms by the year 2025 as a result of the introduction of the state second pension.
	I can see no objection in principle to faster implementation. This is not a funded scheme, where the full benefits cannot be paid until the fund needed to pay for them has built up. This is a pay-as-you-go scheme. If the Government wanted to do so, they could, for example, treat all SERPS rights as rights to a state second pension. I do not suggest that the Government should do that all at once, but I believe that they could and should accelerate the right to the state second pension.
	My honourable friend Professor Webb proposed to speed up implementation by allowing anyone who had proved an entitlement to the state second pension by contributions or credits in any year to receive, by reason of those contributions, two years' entitlement to the state second pension, provided one of those years was exchanged for the right to SERPS accrued in an earlier year. That would mean that earners who have existing SERPS rights could obtain more benefit from the state second pension by substituting it for the less beneficial SERPS rights year by year. That would, of course, accelerate increased government spending on the state second pension, but still over a fairly long time-scale.
	There are a number of other issues relating to pension questions, apart from the question of the state second pension. The Liberal Democrats support an increase in the basic pension at the ages of 75 and 80. We believe that those pensioners are in greatest need. In addition, the provision of increases at those ages would help to reduce the number of cases in which the amount of the state second pension would, over time, fall below the minimum income guarantee level. That is an issue that we shall bring up in Committee. However, I should like to give a warning to the Government. As we know and as, indeed, we have been told, at Report stage in the other place a number of Labour rebels moved the amendment to restore the earnings link for the basic pension. The noble Baroness, Lady Castle, in a passionate speech made clear her intention to do that in your Lordships' House.
	As we made clear in the debates last year, restoration of the earnings link is not our policy. That is not because we believe that the pensions will be adequate as they will stand after the Bill comes into force but because we believe that there are more cost-effective ways to help poor pensioners without forcing them to rely on the minimum income guarantee, which is, of course, income support under another name. As I have already indicated, they include the acceleration of the state second pension and increases in the basic pension for the oldest pensioners. However, if the Government are not prepared to give way on those issues, it is very likely that on this occasion we shall support the noble Baroness, Lady Castle, and the other Labour rebels in your Lordships' House in any Division on a proposal to restore the earnings link, as, indeed, we did in the other place.
	Of course, we welcome the extension of the state second pension to carers, to those with home responsibilities and to those on incapacity benefit. However, we are concerned about the requirement in Clause 30 that credits for the state second pension will be available only if someone is entitled to the invalid care allowance, has homecare responsibility or is entitled to incapacity benefit throughout the whole of a year. As the noble Baroness, Lady Pitkeathley, pointed out, for example, carers may lose their invalid care allowance because the person they care for has had periods in hospital lasting more than 28 days in any period of six months. That seems to us extremely unreasonable. We should wish to look at ways of allowing credits to be claimed on the basis of something less than a full year's qualification.
	I move to the other pension matters in the Bill. Clause 38 deals with the very difficult question of inherited SERPS. The noble Lord, Lord Rix, spoke eloquently on that. We support him warmly in principle. We shall need to wait to see the words of his amendments before we can commit ourselves to support in detail but we shall certainly look on them with a very favourable eye.
	I agree also with the criticisms of Clause 38 by the noble Baroness, Lady Greengross, especially the point that for those who are applying under the government scheme, dishonesty will be the best policy as the proposals now stand.
	In the other place, we moved an amendment to give full SERPS to widows or widowers of pensioners who will be living in 2002 but have already retired, or will by then have retired, and therefore are not in a position to do anything to improve the financial position of widows or widowers. We shall no doubt move a similar amendment in your Lordships' House.
	Chapter II deals with a number of matters relating to occupational and personal pension schemes, especially the selection of trustees, the winding up of schemes and the extension of the jurisdiction of the ombudsman. We give those a general welcome, although there are some issues of concern on the selection of trustees and in particular the position of pensioner representatives.
	There is a need for representation on the board of trustees of pension schemes of both employee and pensioner members whose interests are by no means always in alignment with each other. That issue was raised in particular by the noble Lord, Lord Brookman, and we shall need to look further at those issues in Committee.
	Chapter III of Part II contains provisions relating to war pensions. We do not object to anything that is in Chapter III. However, in another place the question was raised of the termination of the right to attributable pensions of war widows who remarry. That is completely intolerable. That issue was debated on last year's Bill in your Lordships' House. The noble Baroness, Lady Strange, moved an amendment then. She will no doubt do so again and, if she does, we shall support her.
	We shall also support the noble Baroness, Lady Fookes, on the issue of overseas state pensioners. The only reason that they have a low priority is that most of them do not have votes. Certainly, morally and logically, they have every right to have their pensions increased, along with those of other pensioners.
	Finally, Part IV deals with national insurance contributions. The purpose is to make Class 1 contributions payable on all benefits in kind which are taxable in the hands of employees. The alignment of the tax base for national insurance contributions in PAYE makes obvious sense and in principle we support it. Treating some forms of "perk" as NIC-free distorts the system of wages and salaries. That was, for example, particularly true in the case of the company car, which led to an unnecessary and undesirable increase in the number of cars on the road. There is no reason, of course, why employers should not provide employees with health insurance, but that is part of the salary package and should be taxed as such. There may be a case, however, for giving special treatment to the provision of childcare by employers or by third parties at the expense of employers.
	The general principles of Part II and Part IV are acceptable, although there are a number of issues which do not appear in those parts which cause us concern. But there are still worrying problems in relation to the state second pension, especially as regards the slowness of implementation. I believe that we shall need to do a lot of work on this Bill at its later stages.

Lord Astor of Hever: My Lords, the Minister put the best possible gloss on what my noble friend Lady Fookes described as a "vulgar club sandwich" of a Bill. As we have heard today, not all noble Lords agree with the Minister's optimism and she will not be surprised that we and numerous outside bodies which have been in contact with us have many concerns which we shall want to examine critically and constructively in Committee.
	The noble Earl, Lord Russell, said that the Bill did not find favour on his Benches. We look forward to working with his party to improve the Bill.
	First, I turn to the Government's proposed reforms of the Child Support Agency. My noble friend Lord Higgins made it clear that we accept that the CSA needs reform in order to ensure that it functions effectively and with equity. But we have reservations about the way in which the agency is to be reformed, although we agree with the Minister that going back to the courts is not the answer.
	We are concerned about the timescale in which the new, allegedly simpler, formula for assessing claims will take place. According to the Minister in the other place, the new system will not come into force until late 2001 and then only for new CSA claims. The transition may therefore be both long and complicated, which may exacerbate concerns over the system's efficiency and cause real resentment among those caught between the two arrangements. That concern was highlighted by the Social Security Select Committee last year when it said that,
	"the Government should distinguish between the resources allocated to the Agency to deal with cases under the present child support scheme, and the resources to develop the systems, technology and training for the proposed new scheme".
	We are concerned also that there may be pressure for existing cases to move onto the new system before it is clear that it delivers a better service. I should be grateful if the Minister will tell the House what criteria and timescale will be used by the Government to evaluate whether the new system is both more efficient and fairer than its predecessor.
	All the evidence is that the new operation of two systems in conjunction may prove highly problematic, particularly if one is seen to be preferable to the other. Added to that is the potential for the IT systems not to be sufficient to cope. I hope that the Government have fully prepared for the operational implications of such proposals. Will the Minister assure the House that the new computer system mentioned in the Explanatory Notes really will enhance efficiency?
	We are concerned, as is the Law Society, that under the Bill, the CSA can intervene in maintenance agreements, even when they have been drawn up fairly, agreed by the parents and approved by the courts. That reform really would be a triumph of bureaucracy over fairness.
	We have further concerns over the proposals to make criminals out of absentee parents. The decision to incarcerate may very well make it far more difficult for parents to find suitable employment in order to pay maintenance, given both the time spent in prison and the subsequent stigma attached to it by prospective employers and society at large.
	The alternative to prison, which is to surrender a driving licence, is absurd and objectionable in principle. Several noble Lords today have said that they believe that there is a clear distinction between the withdrawal of a driving licence for a motoring offence and withdrawal for failure to comply with maintenance obligations. The Opposition believe that this is a major flaw in the Bill as the Government in effect are saying, "If you don't fancy going to gaol, you can always hand in your driving licence instead." Why driving licences? Why not passports, as my noble friend Lady Byford suggested, or curfew orders, or electronic tagging, as my honourable friend Eric Pickles suggested in the other place?
	Underlying much of the proposed CSA reform is the concept of so-called "rough justice". We on this side need far more convincing of the nature of how "rough" such justice will be and what will be the practical impact of this change in policy. We are also concerned with the impact of the reforms on second families. The Opposition fully accept that it is essential parents realise their responsibilities to all their children. However, the Government have much more to do to ensure that their proposals do not treat second families as second class.
	In particular, the proposals ignore the possibility of the parent with care re-marrying and, as a result, enjoying enhanced circumstances that are greater than those of the former spouse. It would be contrary to natural justice if such changes were not taken into account in an appropriate recalculation of contributions. We believe that the incomes of both the non-resident parent and the parent with care should be taken into account in maintenance payments. It would be quite wrong for affluent parents with care to receive maintenance from absent parents with far lower incomes. That is also the view of the Child Poverty Action Group which called for the proposed protection for second families to be strengthened through a phasing in of the assessments to decrease, help for second families on income support and a broadening of the appeals mechanism. We hope that the Government will treat those concerns with due respect.
	I move on to the Government's proposals for the state second pension. There can be no doubt that the Government are making pension arrangements ludicrously complicated and confusing for the vast majority of lay people. Indeed, many people in the pensions industry to whom I have spoken in the past few days worry at the complexity of the scheme. The new proposals only add to such complexity and increase the number of available options to the bewildered: the basic state pension, SERPS, personal pensions, occupational and company pensions, stakeholder pensions and now yet another state second pension. The complexity will especially manifest itself in the rebate and top-up structure. It will make an already complicated structure even more so.
	Planning for retirement is one of the most critical decisions an individual makes, either privately or as an employee. We feel strongly that the Government should act to make those decisions more accessible for the individual. The two-tier introduction will make it even more complex for lower earners to plan for the future.
	A serious question must be asked about the effects of the introduction of the new arrangements. There is a clear danger that the Government will create two classes of pensioner for the future; those who earn less than £9,500 per annum, and those who earn more. Those in the former category will be effectively trapped in the state system and excluded from private provision. That rigidity is out of line with the increasingly flexible labour market mentioned by the noble Earl, Lord Russell. The proposals are not well suited to those with fluctuating earnings.
	The NAPF said that the danger of pension mis-selling is immense. Individuals will be pushed into one arrangement or another at an early stage of their employment. It also criticised the proposals initially for the evident lack of thought by the Government in relation to the interaction of different types of provision within one overall framework. The sheer complexity, to which the Government have added, would only really be addressed by competent expert advice from pension professionals, which is exactly what people will not obtain within the 1 per cent stakeholder cap. It is highly unlikely that those who suffer from the Government's proposals will have the same access as those who can afford private pension provision. The pensions system needs to reflect and understand the growing career flexibility in this country. These proposals fall far short of that requirement.
	The complexity and potential mis-selling relates not only to the state second pension, but also to the Government's wider approach to pensions, including stakeholder pensions. We believe that measures are required to address those problems, including concurrency between stakeholder pensions and all occupational schemes. The complexity of the Government's pension proposals was pointed out by the noble Baroness, Lady Castle. It was for me a privilege and a pleasure to hear her speak tonight. I am not so sure that it was such a pleasure for the Minister, although I am sure she cheered up when she heard the nice words from the noble Lord, Lord Haskel.

Lord Haskel: My Lords, I thank the noble Lord for giving way. Does he not agree that the reason for the complexity is because people's lives are now much more complicated? This complexity is really the way in which people can move from one pension scheme to another as their circumstances change in their working life.

Lord Astor of Hever: My Lords, I am sure we shall debate that point endlessly in Committee.
	During the Conservative Party's time in office, pensioner income rose. Since coming to power, this Government have attacked pensioners' savings. This April's measly 75p increase in the basic state pension has been combined with such measures as the abolition of ACT dividend tax credit, and the abolition of PEPs and TESSAs. The proportion of national wealth spent on pensioners is less under this Government than under the last.
	The minimum income guarantee will be a massive disincentive for lower earners to save, which hardly equates to a government that preaches the virtues of self-reliance and employment. They admit that an individual will have to work (or care) for 49 years and earn above the national insurance lower earnings limit in order to have an income above the MIG level. That is a blatant disincentive to employees.
	I turn briefly to Part III of the Bill and specifically Clause 61. I make clear that we strongly oppose this clause, as do many other noble Lords who emphatically condemned it. We heard a powerful speech from my noble friend Lord Windlesham, who speaks with all his knowledge on the penal system, his authority as a former chairman of the Parole Board and his experience as a Minister in the Home Office. My noble friend made some important points which I shall not repeat. However, I feel that we must have a full response from the Minister tonight and some assurance that the Government will think again.
	The noble Baroness, Lady Kennedy of The Shaws, also spoke on this subject, mentioning a possible breach of the Human Rights Act. Furthermore, I understand that the National Association of Probation Officers believes that the proposals for the removal or reduction of benefits from offenders who breach community court orders breach the Act she mentioned, and the United Nations Convention on Human Rights. I should be grateful if the Minister could clarify the position in that regard, particularly in view of what my noble friend Lord Higgins said in relation to the Explanatory Notes.
	With regard to Part IV and NICs, we are concerned that the Government are imposing yet another stealth tax on business by extending national insurance liability to benefits in kind. The Government's approach seems to be, "If it is taxable, it is NICable"; and they are nicking another £225 million through that provision.
	Social security and welfare reform generally have been hailed as an area in which the Government will think the unthinkable in order to put the national interests first. But the gap between rhetoric and reality has been considerable. We on this side accept the need for a range of reforms to ensure that we meet the challenges of the 21st century both socially and financially. These measures from the Government will go no way to meet such challenges and it will be for their successors to deliver, which we shall.

Baroness Hollis of Heigham: My Lords, I want to begin by quoting my noble friend Lord Haskel, and not for the reasons your Lordships might think. He was right to describe the Bill as an attack on poverty. It is an attack on the poverty of children and pensioners. It is an attack on poverty among children because we know that those who are poor in our society are the children of mothers who are not in work and where the child is not receiving maintenance. It is an attack on poverty among pensioners because we know that poor pensioners are primarily older, often widows who have no occupational pension on which to draw. For the longer term, we hope that the moves we are making on state second pensions and stakeholder pensions will resolve that problem. However, we have issues which must be addressed now. Therefore, my noble friend was right in saying that the Bill is about poverty.
	I shall begin, as did your Lordships, by reflecting on the structure of the Bill and dealing with the comments on the Child Support Agency. I was pleased that the principles of our actions were welcomed by my noble friend Lady Crawley, the noble Baroness, Lady Fookes, and the noble Lords, Lord Higgins and Lord Astor. I was particularly pleased by the tribute that the noble Baroness, Lady Fookes, felt able to pay to the staff. They have had a most difficult time. Unlike any other government officials who have a one-to-one relationship with a client wanting a benefit, a passport or whatever, the CSA staff have been the lightning-rod in all kinds of marital disputes between warring partners. If he gains, she loses and if she gains, he loses. I know of stories of staff who have received razor blades, excrement and so on in the post. They have had to do a difficult job with heroism and grace, and I was delighted that the noble Baroness paid tribute to them. From everything I have seen of their work, I can endorse that.
	The Conservative Front Bench in both opening and winding-up speeches made points, which I take, about the difficulties in running two schemes side by side and about the issue of phasing. I agree; we thought long and hard about the matter. It was a question of trying to assess the risk of a "big bang" approach on a new IT system or of trying to phase in implementation by taking new cases first--those which come in during the first year--and taking existing cases as and when we are confident that the IT system is robust and that we are achieving the speed and accuracy of assessment that we believe the new system will allow us to generate. We had to choose between those two aspects, but everything we have learnt about government over the past 10 or 20 years has suggested how unwise it is to go for a "big bang" if an alternative is available. We believe that there is.
	The noble Lord, Lord Astor, suggested that the problem was compounded by the fact that we are phasing in the system over a number of years. Someone currently receiving £30 which must rise to £60, or someone receiving £60 which must fall to £30, will not see the change overnight; it will be phased. If the mother is in receipt of WFTC, he would like to phase if he is a loser but would like immediately to move to the new assessment if he is a winner. The reverse is true for his former partner.
	We believe that, on balance, it is right to phase. At the core of our concern is the possibility that if he were asked to pay more on the same level of income overnight, his finances would be thrown into real hardship. We believed that it was therefore right to phase. We are talking about a period of five years and we can discuss that, but we believe that it strikes the right balance between the conflicting and sometimes warring interests of the two partners and the need not to throw his finances into disarray by imposing possibly a substantially different assessment overnight when he has only the same level of income and pre-existing commitments.
	I was asked why we are not taking into account the income of the parent with care. First, we believe that the parent with care--it is usually the mother--is meeting her responsibility for the care of the child because the child, by living with her, enjoys her standard of income. Her contribution is coming, so to speak, in kind because the child is living in her household. His contribution is coming in cash because he does not. If it were an intact family, both would be contributing in much the same way.
	The first point is philosophical: she is already contributing. The second point is practical and administrative: 96 per cent of parents with care have incomes of less than £100 a week. Only 500 on our casebook of 1.2 million have incomes over £500 a week. At that point, they might be expected to be making a realistic financial contribution. So for the sake of 500 or 1,000, we should have to assess the income of every parent with care and, as was suggested by the noble Lord, the income of her new partner, which means that we must also assess the partner of the non-resident father. Instead of assessing only the father, we should have to make four assessments: the parent with care, her new partner, the non-resident father and his new partner. If that were to be done, instead of seeking three pieces of information, we should have to seek 30 or 40 in order to get an accurate assessment. In that case, noble Lords would be reimporting back into our simple formula some of the complexity that has made the existing agency impossible successfully to administer. Therefore, philosophically, it is not right; administratively, it would be a nightmare; and it is not worth it.
	It was said that we are not treating second families fairly. On the contrary, most second families will see a lower assessment and a more generous treatment of children in second families, including the non-biological children who are treated in exactly the same way as the biological children of the non-resident parent. There will be no first and second-class children in our system either between first and second families or within a second family. Therefore, I hope that on reflection the noble Lord will think his remarks in that respect not justified.
	The noble Lords, Lord Higgins and Lord Astor, and the noble Earl, Lord Russell, spoke of the courts. The noble Earl and I have a philosophical difference about them. I believe that the previous court system failed children. I believe that that was accepted by the noble Lord, Lord Higgins, and the noble Baroness, Lady Fookes. It was unfair in its incidence; it was ineffective in collection and it was adversarial in style. What do you say to a child when he sees his father going to a court to try to reduce the amount of maintenance he should pay? What kind of message are you sending to a child when he sees his father taking on that role?
	The system was unfair in its incidence. We know that in 1988, on average earnings of £140 a week with three children, 25 per cent of all fathers were paying less than £15 a week in maintenance and that 25 per cent were paying more than £40 a week. That was on identical finances and with an identical number of children. The system was a lottery; it was unfair; it was not effective and it was adversarial. We believe that it would be wrong to return to it.
	I do not mean to be unfair to the noble Earl, Lord Russell--if I am, I apologise--but I listened carefully to his speech and noted that he made much of his concerns about the unfairness to fathers. I do not believe that at any point he mentioned the well-being of children in our reforms of the CSA. That was significant.

Earl Russell: My Lords, that omission will be made up for many times before the Bill is through.

Baroness Hollis of Heigham: My Lords, I am sure that it will be now that I have reminded the noble Earl! However, noble Lords, particularly on the Conservative Benches, were concerned about the implications for the CSA and the court settlement. Perhaps I may remind your Lordships that the original proposals for the agency were that the courts would have no discretion on child support. The CSA settlement would run over all court settlements which would have to import the CSA figures.
	That was rightly not pursued because it would have been further retrospective activity, particularly for existing court cases. We are trying to do something perhaps more subtle, but I hope more supportive. We are saying that where parents agree and go to court or where they reach a private arrangement and the mother is not on benefit, that is fine. They can make whatever arrangement they want because they are perfectly entitled to do so. The taxpayers do not have a financial interest in the level of benefit and therefore the level of maintenance. However, we are also saying that there should be a right to return to the CSA. Therefore, it is for the CSA to collect its own level of enforcement where after 12 months that arrangement is pulling apart and where there is some sense of unfairness and grievance.
	Why have we done this? It is quite simply because we want lawyers, rather than having to impose on them acceptance of the CSA settlement, to have the mindset that if either party is dissatisfied with the arrangement on child support, either party has the right to go back to the CSA. The father may decide to pay more because, for example, he is paying for a disabled child. He may choose to pay less because he may be helping to pay school fees. If both parties are satisfied, that is fine, unlike the original arrangement, which would not have been fine. We want lawyers to be very aware that if there are disputes, the benchmark is the CSA figure. If courts want to tailor a settlement more appropriately to individuals by whatever means, we think that is right and proper; but basically the CSA settlement is the fallback of last resort, where couples end up disagreeing.
	I was asked by my noble friend Lady Howells about naming fathers. Where there is the possibility of fear of distress or violence, I think that we have a decent system of good cause. Indeed, many European countries do not have any good cause arrangements whatsoever, on the grounds that they do not want the woman to have any choice and therefore do not want to offer the man any ability to put pressure on her to exercise that choice to keep him anonymous. However, there have been instances in the past where, for example, fathers have been advised on a website to break a window in order to show that they were violent and therefore would not have to pay maintenance. If we were to follow the line about allowing maintenance to be voluntary, we would effectively be rewarding bad behaviour. We believe that that is wrong.
	My noble friend asked about three-person tribunals. We introduced the new system in June 1999 and I am not aware that there have been any problems. However, I shall check and see whether my noble friend's worries are validated by the research.
	The noble Baroness, Lady Byford, asked about named officials in order to help to resolve problems. She is right. We want to get consensus and compliance as far as possible, and not enforcement. Since last month, we have had in place 600 face-to-face officials, who will offer an interview within 10 days to either party in their own home, in the workplace or anywhere else, to try to resolve their child maintenance problems. So far, the scheme is working successfully. That deals with most of the questions dealing with child support. Of course, I shall write to noble Lords if there are any questions that have been left unanswered.
	A second cause for concern over the Bill was the state second pension. The noble Lord, Lord Higgins, accurately described the three tiers of pension and my noble friend Lord Haskel rightly described how it was designed so that people could move easily and seamlessly between the three systems. I was asked by the noble Lords, Lord Higgins and Lord Goodhart, about the interconnection between the state second pension and the fallback on MIG. The facts were rehearsed in the other place, and your Lordships may know them by now. Essentially, for an average earner contracted into the state second pension, the MIG would not overtake the basic pension and the state second pension until some 15 years after retirement age. That in any case is due primarily to the additional payments made at 75 and 80 to MIG rather than to any deficiency in the state second pension.
	My noble friend Lady Pitkeathley asked several questions about carers, and I am delighted that she felt able to welcome this aspect of the Bill. On the point about somebody who is being cared for moving frequently but erratically into residential care, it is the case that under our proposals a carer could have a possible total of 12 weeks' break in any of 26 weeks, and not more than four weeks of that might be holidays; and they would not lose their entitlement.
	As for earnings, any carer who earned above the LEL would retain an underlying entitlement for that part of the year. Anyone who earned below the LEL would be in exactly the same position as anyone else earning below the LEL, which would not be an entitlement to the state second pension. I regret that we cannot make it retrospective because if it were retrospective it would be retrospective for all possible client groups within the strategy for disabled people and those who are caring for children. My noble friend asked about the timetable for the review: that is in the context of following up work for the national carers' strategy and the Government's response to the Royal Commission. We are awaiting final determinations on that.
	The third major issue raised today on the state second pension brought linking remarks from my noble friends Lady Turner and Lady Castle. First, they pressed me about the destruction of the earnings link to retirement pensions rather than going down the road of MIG and the like. I should like to say, first, that for only four years has there been an earnings link and that wages were exceeded by prices for at least two of those years. However, there is a bigger issue: the question of choice. We could, if financial priorities allowed, restore an earnings link and we could give a little to everyone, or alternatively we could choose to concentrate, as we are doing, on the poorest.
	Why are we doing that rather than giving a little to everyone? It is a difficult choice, but the reason why we are concentrating on the poorest is that since 1979 inequality in pensioner incomes has grown substantially. Most pensioners are not poor, although some are. Fifty per cent more pensioners have been enjoying occupational pensions since 1979. For most of us the average growth in earnings since 1979 has been 38 per cent. The growth in pensioners' income has been 64 per cent--almost double--but the bottom 20 per cent of pensioners have seen an increase below the average increase in national incomes; the increase of the top 20 per cent has been well above it.
	That is our dilemma. Do we seek to add to the income of better-off pensioners, who have seen their income grow by 64 per cent since 1979 or do we target the poorest? We have chosen to target the poorest. As a result, a pensioner couple of over 75 who could have had an earnings-related hoist of £6 per week, will get an entitlement to a MIG hoist of an extra £18 per week on income of £125. That is the choice: £6 for couples over 75 or £18 for the poorest couple. We have chosen to concentrate on the latter. My noble friends may disagree with me, but it is an honourable choice, and it is not a cheap choice. Far from £800 million being spent on pensioners, something like £1.8 billion extra will have been spent on pensions by the end of this Parliament. I agree--

Lord Higgins: My Lords, of course all this is totally inconsistent with the television licence and the winter fuel payments going to all pensioners.

Baroness Hollis of Heigham: My Lords, I take the point about TV licences. Of course, it is for the over-75s and I would go back to the point made by the noble Lord, Lord Goodhart, that it is those over 75 who are proportionately the poorest pensioners because they are for the most part elderly women. In that sense, I think it is reasonably targeted.
	My noble friend Lady Castle was absolutely right when she said that if we are going to target, which I believe is the decent, honourable and right thing to do given what has happened to pensioner incomes since my noble friend was Secretary of State, we must make sure that such targeting is accompanied by allowing the dignity to which every pensioner is entitled. That is our problem: how to target people without bringing about the ignominy of people refusing to seek that pension increase because they dislike the means testing involved. That is precisely why we have promoted telephone help. Pensioners will be entitled to apply for the increase in their own home through electronic transmission. I can give the telephone number to my noble friend: it is the number which pensioners should call in order to get the money to which they are entitled. The number is 0800 028 1111. I hope that that number is engraved on your Lordships' hearts, because money that people should have is going unclaimed and we are trying to make sure that they get it in a way that is entirely consonant with the dignity they are entitled to have.
	Perhaps I may now turn to questions about widows which were raised by the noble Lords, Lord Higgins and Lord Rix, and by the noble Baroness, Lady Greengross. We have made it clear that recompense should be tied to tangible evidence of loss. Clearly it is not the Government's responsibility to compensate people because there has been a change in the law. What the Government are seeking to do is to target what might be called the mis-selling problem; to compensate people in cases where they have been misled and as a result have acted to their own detriment or failed to take action that would have corrected any detriment they might have suffered. It is not unreasonable to ask people for evidence that they were being misled and that they would have acted differently, but a lack of documentary evidence does not necessarily mean that the claim would fail. That claim will be decided on the basis of information which the claimant gives on the claim form. People will be contacted by post for further details and, of course, claimants will be asked to sign a statement that it is a true account.
	The noble Lord, Lord Higgins, asked me whether that was consistent with the ombudsman's recommendation for a "global" response. Yes, it is a global solution. The scheme applies a common form of redress to all successful applicants; in other words, compensation is not related to individual circumstances but is available to all those who were misled or who would have acted differently and therefore relieved themselves of some possible financial detriment. At a recent hearing, the Parliamentary Ombudsman stated that the inherited SERPS scheme meets the definition of a global solution. I hope that that addresses the noble Lord's point.

Lord Higgins: My Lords, no doubt we shall return to that point later, but are we right in understanding the Minister to say, in line with what the ombudsman was apparently saying, that what would be required would be evidence of loss rather than of being misled?

Baroness Hollis of Heigham: No, my Lords. What I was saying is that we are seeking to establish that someone was misled and that as a result he acted to his detriment, or could have acted in a way that would have avoided that detriment, but that if he does not have documentary evidence to that effect, the case will not necessarily fail. It will be investigated and discussed in the usual way.
	I turn to a shopping list of smaller items. The noble Baroness, Lady Strange, gave notice that she was going to raise the question of war widows. I see my noble friend Lady Symons on these Benches. I am sure that she was pleased to hear that news. The noble Baroness, Lady Fookes, and the noble Lord, Lord Goodhart, said that they were going to raise the question of overseas pensions again. We know our positions on that matter. I can say only that my position is the same as the previous government's position: that that was not a priority. I did not challenge the noble Lord, Lord Mackay, at any time when he was also resisting claims to that effect.
	The question of ACT was raised. The noble Lord, Lord Higgins, pressed me about how it was to be paid. I believed that I had answered that point, but I am sorry if he felt that I did not. Basically, the expectation is that from 2003--the noble Lord will understand that, being three years off, not all the fine print has as yet been worked out; that is the whole point of having consultation and discussions with POCL and the sub-postmasters--to 2005, schemes will come in so that either the Post Office will be acting as a bank for other banks, such as Lloyds TSB, which will effectively be treating the Post Office as an outpost, given the new electronic transmission claims--and, incidentally, paying them more than we would pay them--or, alternatively, the Post Office will be acting as a credit account or holding a credit account for someone in their own right as a form of universal bank.
	We shall be receiving the PIU report in early summer, but I do not see why there should be any difficulty in getting one's head around the concept that the Post Office will hold that account. The advantages for people who currently do not have a bank account will be huge. They will be able to write cheques; they will not need to go to cheque changing agencies; they will be able to pay in their money; they will be able to draw part of their benefit; there will be greater security against fraud; and they will be brought in from those grey areas of dependence on pawnbrokers, money changers and credit catalogues, which have been so costly to so many of our people.
	There are points about annuity rates but, given the time, I shall pass those by for a moment if I may and return to them in writing. My noble friend Lord Brookman asked several questions about mandatory pensioner trustees and whether I agree that pensioner trustees added value. Yes, of course I do, but we believe it unwise to suggest that pensioner members should be there in a representative capacity any more than anyone else. That was one of our concerns. We are conscious that pensioner members feel in some cases that they have been unfairly excluded from involvement in some schemes. That is why the revised provisions go further to ensure that pensioner members cannot be unfairly treated; unlike the current prescribed appropriate rules, pensioner members will be involved at all stages of the trustee route.
	It will still be possible for the employer to propose arrangements that do not involve pensioner members in the nominational selection of member-nominated trustees. However, those proposals are subject to member approval and all pensioner members would have to agree to them. If approval is not gained, the alternative is the trustee route which guarantees that pensioners can make nominations and stand for selection. My noble friend asked questions about the 10 per cent being excessive. It is in the existing legislation; we have no evidence of any particular problems with it. But if my noble friend has and he cares to write to me, I shall do my best to answer him.
	Finally, I return to a question which, perhaps more than any, was of concern to your Lordships this evening; that of community punishment. I assure the noble Earl, Lord Russell, that there will be pilots and that they will be carefully evaluated by independent external researchers funded by the DSS, the Home Office and the DfEE, particularly on behavioural points. I am expecting that external independent research to be as scrupulously handled as any research which comes through the department. I should certainly expect nothing less.
	On the more substantial point raised by the noble Lord, Lord Windlesham, the right reverend Prelate the Bishop of Lincoln, and my noble friend Lady Kennedy, we have taken legal advice and I am assured that our proposals are compatible with the ECHR. I have checked and checked again and I am told that that is the case on legal advice. If that advice is inaccurate or those cases are tested and it is found to be incorrect, so be it, but I have checked on many occasions and that is the assurance I have been given and the legal advice I have obtained.
	A number of your Lordships said that we were offering double punishment. If I may say so, anyone familiar with social security legislation would know that that is not an acceptable description of what we are doing. Benefit entitlement in this country has always been conditional. Even David Rendel, an honourable Member in another House, has said that no one believes that people should receive benefit for doing absolutely nothing. It has always been conditional; for example, we have benefits sanctions if someone is on JSA, is supposed to be actively seeking work and fails to do so. We have benefits sanctions if someone is supposed to come to a ONE interview and has no good reason for not doing so. We have benefits sanctions if women who should co-operate with the CSA have no good cause for not doing so and still fail to do so. In the whole array of DSS benefits it is accepted that there are grounds for benefits sanctions, which may or may not be challenged in your Lordships' House in any particular case, and that benefits are not unconditional.
	We are attaching another condition to benefit, not offering a second punishment. That is the Government's position. The situation will be clearly explained to anyone concerned. A sanction would occur only after a second offence. Essentially, the provision would be about entitlement to benefit, not a second punishment. My noble friends said that that would be harsh, particularly on women and on black members of our society and so on--

Earl Russell: My Lords, I should be grateful if the Minister could explain why that condition is relevant to the receipt of benefit.

Baroness Hollis of Heigham: My Lords, I do not understand the noble Earl's question.

Earl Russell: My Lords, why is the question whether or not people breach community service orders relevant to their entitlement to social security benefits? I can understand, if not always accept, social security conditions; these I do not understand.

Baroness Hollis of Heigham: My Lords, the Government believe that if a person seeks benefit from society, as taxpayers we have a right to attach conditions to that seeking of benefit. I refer obviously to the day-to-day conditions of benefit entitlement; for example, one cannot claim for children if one does not have any; but it is also the case that if someone is required by the courts to observe a community sentence and he fails to do so and, if after the first offence where he is warned, he still persists in failing to accept that community sentence and to observe by its rules, we believe that it is reasonable that society should say that the other part of its contract with him to support benefit is not upheld; that he has broken it and therefore, as a result, the sanctions on benefit have come into play.

Earl Russell: My Lords, does the same principle allow withdrawal of benefits for those found speeding?

Baroness Hollis of Heigham: My Lords, it is interesting that the noble Earl is pushing me on that point. At the moment, I understand that something like 130,000 community sentences per year are passed. Something like 30,000 per year are breached. Some of those sentences are for quite serious offences, but they are being breached. As a result, we want to ensure that such young offenders--they are often young and mainly men--observe community sentences. If society as a whole and taxpayers offer benefit to people who in turn renege on their obligation to society--that is what they are doing if they fail to observe a community sentence--we have a right to consider entitlement to benefit. That is the approach of the Government.
	It is not the case that women, in particular, will be affected. Of those on community sentences, 89 per cent are men. Nor will it affect, in particular, the ethnic minority community, although they have a slightly higher representation than in the population as a whole. We do not believe that the incidence of this will be unfair either on women or on black and ethnic minority communities.
	I realise that your Lordships have dissatisfaction with different aspects of the Bill. I can appreciate where noble Lords are coming from. However, I return to what my noble friend Lord Haskel said. At the core of the Bill are two proposals: first, to tackle the poverty of children who do not receive maintenance, and, secondly, to tackle the poverty of pensioners who do not receive the minimum income guarantee and who in future will remain reliant on means-tested benefits unless we can lift them off that by the state second pension that we propose in the Bill.
	This Bill is a good Bill. It tackles the poverty of two or more sections of our society. I hope your Lordships will support it.
	On Question, Bill read a second time, and committed to a Committee of the Whole House.

Defence Evaluation and Research Agency

Lord Hogg of Cumbernauld: rose to ask Her Majesty's Government what their long term objectives are for the Defence Evaluation and Research Agency as part of the development of the United Kingdom's knowledge-based economy.
	My Lords, I am most grateful to the House for affording me the opportunity to raise what I believe to be an important matter. I am reinforced in that belief having read the business section in yesterday's Sunday Times.
	I begin by commending the Government's recent publication of the consultation document on science and innovation. Within it there are several key principles in which, as a government, we have strongly believed for many years.
	The Government look at the UK's science base as a key driver for economic growth and international influence. They are actively promoting greater technology transfer and unlocking the scientific resource residing both within government and through our universities to the benefit of the economy and the country's quality of life.
	However, we must be careful not to allow the forces of conservatism--if I can use that phrase--to thwart our vision of an active knowledge economy. I refer in particular to the proposed public-private partnership restriction on the Defence Evaluation and Research Agency, the MoD's science and research agency.
	I shall give some facts that demonstrate the significant scientific and technological achievements of some of our country's unsung scientists and technicians. I shall mention just three to make my point. DERA were behind the original technology for liquid crystal display; the original and new generation of carbon fibre; and the next generation of voice recognition software. Without DERA, many technologies that we take for granted today would not have been developed.
	The proposed PPP for DERA aims to offer the organisation the opportunity to work more effectively within the civilian market; to exploit its knowledge into real and tangible businesses and to enter into new joint ventures establishing a vibrant centre for technological development and wealth creation. Put simply, it would be a world class resource.
	The purpose and intention are sound, but I am concerned about the proposed method. In my view, the proposed method for releasing DERA runs counter to the Government's overall intentions. The organisation is proposed to be divided into two separately run bodies: the sensitive research functions would be in an organisation still run by the MoD and the technology side would be split to form a company attracting private finance. While that deals with the security elements of the work of DERA that is retained by the MoD, potentially it offers the worst of all worlds.
	One of our great scientific jewels would be dismembered. By separating the sensitive from the technological, we would lose one of the most important elements of DERA, which is its ability to translate the sensitive into the commercial. We would destroy the bridge between the two that is unique and valuable. The value is in the relationship between the two. We should resist that divorce.
	There is also the employment issue. I understand that the model proposed could result in over 3,000 job losses in the sectors where we are working hard to encourage more employment. I hope that the Minister will say something about that. I further understand that the United States is concerned about any joint collaboration falling within the private sector. I appreciate that concern. However, we must not construct the whole model on that basis. Under the existing structure DERA manages the divide between areas of United States security collaboration and the more commercial elements of its work effectively. That raises the question: could that continue as effectively into the future?
	The challenge for those addressing this issue is to marry the following concerns: to maintain the justifiably sensitive research within the Government's domain--I emphasise the word "domain"--to ensure that the overall objective of liberating a core international centre of research and technological development is achieved with significant benefits to the UK economy, and to maintain the integrity of the organisation and its staff at the highest level possible.
	At the moment a good model is already being debated in Parliament: the publicly owned plc proposed for the Post Office. I believe that that offers the best solution. It would provide the ability to reassure the United States that the sensitive elements of DERA are still government owned and managed. It would give DERA the ability to enter into long-term ventures, to attract finance for longer-term investment and to develop subsidiary companies in non-sensitive areas; and it would maintain the integrity of the organisation, ensuring that this unique centre of excellence was not dismembered into two rather average organisations, if I may put it that way. We should retain the employees within the public sector and ensure that the long-term assets of DERA are exploited for the greater benefit of the United Kingdom.
	I commend to my noble friend the liberation of DERA from the confines of MoD into a free-standing, publicly owned plc without destroying the long-term potential or existing integrity of an organisation of which we can all be proud.

Lord Faulkner of Worcester: My Lords, I congratulate my noble friend Lord Hogg of Cumbernauld on securing a debate on the future of the Defence Evaluation and Research Agency. The outcome of the Government's review has been awaited anxiously by the 12,000 people who are directly employed by DERA and by many thousands more who live and work in the towns where the agency is based, and who, to a greater or lesser extent, are dependent on DERA for their own business livelihood.
	I intend to speak mainly about the DERA establishment that I know best as it is situated close to my home in Worcestershire. Although I have lived in the Malvern area for most of my adult life and have been aware of how important DERA is to the economy of the town and its surrounding area, it was not until some weeks ago when my noble friend first sought this debate that I arranged to spend the better part of a day at DERA Malvern to find out more about what they do there. I am pleased to put on the record my thanks to Dr Norman Apsley and his team for giving me such a comprehensive and impressive view of DERA Malvern's work.
	It is hard to over-estimate the importance of DERA to the area. DERA Malvern's turnover is over £150 million and the financial impact on the local economy is worth a further £50 million annually, taking into account the spending of salaries and commercial arrangements with local suppliers.
	DERA Malvern provides much of the MoD's advice on Command and Control and on sensors, which, in cost value terms, probably represents at least half of the £9 billion equipment spend each year. In addition, the technology itself is made available to the defence industry. This has resulted in 13 Queen's Awards and other prizes.
	DERA is by far the largest single employer in the town--including the two associate outstations at Defford and Pershore, there are 2,250 staff working for it. Of these, no fewer than 1,800 are first-degree graduates and 900 have PhDs. Their fields cover physical electronics, communications and computing. John Jay, writing in the Sunday Times on 20th February this year, described DERA as,
	"one of the world's finest collections of research talent".
	There can be no other non-university town in the land with such an academic population as Malvern. The link with education is intensified because many spouses and partners of DERA employees are themselves teachers at local schools. Members of staff have always participated fully in the life of the community, serving on local political bodies and charitable bodies and working with schools and other organisations.
	DERA supports education in the town through sponsorship of the local high school's technical college status and in many other ways, such as science weeks, the "Bring our Children to Work" scheme, scientific and other professional work experience. It also acts as a local focal point for national institutions, such as the Institute of Physics and the institute for electrical engineers, and it hosts or sponsors local lectures and seminars. It offers a local venue for the annual DTI sponsored Innovation Lecture.
	In the autumn DERA is also one of the main supporters of the Malvern Festival, which was created by DERA scientists four years ago. It is an integral part of the district, the county and the West Midland economic strategies. The director, Dr Apsley, is a member of the Regional Innovation Strategy Steering Group and a CBI regional councillor.
	The Malvern Hills Science Park is a joint endeavour between DERA, the district council, the county council, the chamber of commerce and the Regional Government Office. It opened last September on land leased from DERA. The Defence Diversification Agency has one of its seven offices on the park and, with DERA, is working well with local businesses.
	I turn now to the wider West Midlands. DERA wants to create a regional market for its science and technology advice. It is just beginning a project funded from the EU and the Government Office, called DERA Malvern Science Laboratory, which aims to use their collective science and technology to support and create new business in the West Midlands Objective Two sub-regions. DERA Malvern also succeeds in selling its wares to West Midlands businesses such as Jaguar, Rover, IMI and Dowty Wolverhampton.
	There is more that I could say about how crucial the future well-being of DERA is to the well-being of the town, the county and the region, but I hope that your Lordships will have gained enough of a picture to understand how anxiously the outcome of the Government's review has been awaited. There is general acceptance that retaining the status quo is not an option. The end of the Cold War and reductions in defence spending meant that the flow of work from the Ministry of Defence would, inevitably, slow down. However, the scope for high level work with the private sector is enormous and I have already given noble Lords some examples this evening.
	I am aware that DERA's trade unions were opposed to any solution that involved a break-up of the agency, or put it into the private sector. But my own view is that the public private partnership that the Government put forward as their preferred option in May 1999 could have worked and was worth a try. The consultation document of the Ministry of Defence at that time spoke of creating,
	"a special purpose corporate vehicle containing most of DERA's existing staff and facilities. DERA would operate in the private sector with mechanisms to preserve its essential character and to protect MoD's interests".
	MoD said that,
	"a principal driving force in arriving at the proposed option was the desire to keep DERA, as far as possible, an integrated organisation and thereby retain its broadly based capability".
	This became known as the "Reliance" option.
	It would not be true to say that these proposals were universally welcomed; indeed, far from it. The trade unions combined to produce a "privatisation campaign newsletter" and urged a mass letter writing campaign to Members of Parliament in another place. Private sector defence companies did not much like the idea of a new highly-experienced competitor advising the MoD and competing with them for research funds. The Defence Select Committee did not like it and called the proposals "fatally flawed".
	Had the opposition come just from political and trade union sources in this country, I suspect that the Government might have pressed on with the "Reliance" option. But I believe that the Financial Times got it right on 31st January when it reported that the United States Pentagon had vetoed this approach because,
	"US military chiefs reacted with alarm to a proposal that could have involved British defence companies getting their hands on US secrets during collaborative projects. The government's first plan, to keep most of DERA together and sell a stake to investors, was blocked by the Pentagon, who feared the potential leak of its secrets to the detriment of US national security and American companies".
	So that went off the agenda and, until today, we were still waiting to hear what the Government's decision would be.
	One possibility might have been a minority sale of the whole company, in the way described by my noble friend Lord Hogg of Cumbernauld, which would have made DERA a Government-owned company with some of the shares going to the private sector. But, frankly, I cannot see how the Americans could have gone along with that idea, given their opposition to the "Reliance" option, because, in their eyes, the private sector would still have been involved to an unacceptably large extent.
	Therefore, it is not surprising that "Core Competence" now seems to be the preferred option, with perhaps 3,000 of DERA's employees becoming MoD civil servants, providing the core of knowledge to the Government and enabling them to work on secret projects with the United States, as well as offering impartial advice on weapons procurement.
	It is interesting to note how much of this debate has been conducted in the media. Indeed, Flight International magazine suggested in an article in its 25th January issue that,
	"the core competences would include the Centre for Defence Analysis, the chemical and biological warfare capability at Porton Down, its library service and areas believed to include access to US surveillance satellite data".
	The remainder of DERA would then be offered to the private sector through a PPP. That, because of the nature of the work carried out at Malvern, would obviously include a very large part of the DERA operation in that town.
	I am clear that DERA represents a unique national resource which must be given every encouragement to grow and prosper. Already at Malvern they are looking to expand their outside commercial work from 6 per cent of turnover in 1999 to 33 per cent in 2005. They envisage no reduction in staff during that time.
	I am sure the Government appreciate the paramount importance of ensuring that they do nothing to destroy the conditions that will allow DERA in Malvern, and elsewhere, to continue to play such a vital part in the life of the towns, the counties and the regions in which they are situated, as well as in the nation's defence industry. I very much look forward to hearing from my noble friend the Minister what route the Government have finally decided to adopt.

Lord Brett: My Lords, I congratulate my noble friend Lord Hogg of Cumbernauld on initiating this very timely debate. I echo his support for the public sector option. I echo too the appreciation of my noble friend Lord Faulkner of Worcester of the quality and value of Malvern. I, too, read the Sunday Times. I have to say that I read the headline,
	"MoD Research Sale Puts 3,000 Jobs at Risk",
	with more than a little anger.
	There are those who would say that Parliament has the first right and responsibility to hear of major government decisions. Although that is important, I actually take a slightly different view. Do not the staff concerned have the right to hear such news from their employer first rather than reading about it in a national newspaper, which, inevitably, will not always be correct? In this situation, they had a choice. They could either ignore completely the fear of a 3,000 job loss; or they could read the business section story in the Sunday Times--which, incidentally, was quite credible as regards the now-known facts--and then realise that there was an option before them which was not the one they would wish to see and which could be quite damaging to their interests.
	It is disgraceful that such a leakage took place in this way. I ask my noble friend the Minister to give an assurance that the MoD was not responsible in any way for it. Since then, like other noble Lords, I have had the opportunity to obtain a copy of the consultation document, which was made available at 3.30 p.m. today. It provides for 30 working days--a very short period--of consultation on the Government's preferred option, which is not the option that my noble friend Lord Hogg and I would have preferred.
	However, rather than continue that debate, I make the obvious statement that the consultation document begs many questions. I have a number of questions for the Minister. I recognise that as I have had the document for only some three hours, my questions will not be as comprehensive as I would wish. I do not seek comprehensive answers from the Minister to all my questions. I shall be happy with a written reply if the Minister feels that at this point insufficient detailed information is available to enable her to respond.
	It is interesting to note that the consultation document recognises the stakeholder interests. Here I should declare an interest. Before I entered the House a year ago I retired as general secretary of the Institution of Professionals, Managers and Specialists, the membership of which includes the vast majority of the scientific and technological staff of the Ministry of Defence, including those employed in DERA. Therefore I have had an intimate knowledge of the events we are discussing. Since I entered the House I have maintained an interest in those events although the views I express tonight are my own.
	However, in terms of the stakeholders, what can be offered to the private sector? It is not a case of offering a production line or a series of items of high technology, but rather the intellectual property rights that derive from the skills and experience of scientists and technologists. The work of the scientists and technologists has given DERA its high reputation for innovation and technology. The stakeholders comprise an important element of DERA. Unhappy stakeholders never result in a company being successful. I hope that we shall do much more than we have done so far to reassure the staff about their future.
	The noble Lord, Lord Faulkner of Worcester, mentioned the views of the Select Committee in another place on the matter we are discussing. I believe that most of us recognised that the Smart procurement initiative was a worthwhile way forward. However, that begs the question as to whether our defence research industry would be prepared to collaborate with the public private partnership, which would involve a substantial privatised element. It has indicated its unhappiness on that issue over the past 12 months. That is a major issue. We know that the staff--one stakeholder--are unhappy at the moment, but we may be able to assuage their worries over time. In the next 30 days we shall discover whether the defence industry--another major stakeholder--is equally unhappy, or whether it has been placated by the contents of the paper that is before us.
	A number of questions need to be answered. Are intellectual property rights to be transferred from DERA to the new PPP? Clearly, the intellectual property rights will have a major impact on any evaluation of such a body. Do we have an estimate of the costs of separation? Throughout a dynamic leadership of DERA in the past decade, Sir John Chisholm has spent much time and effort and has been successful in bringing about a much more integrated agency. Ironically, some degree of separation now appears to be proposed which must involve associated costs. I refer to the creation of Chinese walls and the re-creation of duplication in some areas that we have removed. Again, the Minister may not be able to respond to that question tonight, but I hope that the answer will be forthcoming.
	A number of concerns arise as regards staffing issues. The Principal Civil Service Pension Scheme is valued for its ability to provide pensions that respond to periods of higher inflation than we suffer from at the moment. Staff will wish to ensure that that valuable part of the remuneration package is not undermined. Many staff have many years of accumulated rights under the scheme in terms of redundancy provision. There have been fears at the time of previous privatisations--I refer to the dockyards and others--that subsequent private sector employers might alter such benefits on the ground of cost. That, again, is an area where staff need to be given assurances.
	I am more curious than outraged by the suggestion that military personnel will work under the new arrangements with their status unchanged. I am fascinated to know how the command structure will operate if military staff work for a privately owned company. However, I am sure that an answer to that question will be forthcoming. I particularly seek an assurance that at the end of the consultation period, which is only some six weeks away, the Minister will meet with the trade unions nationally, whatever the outcome of the consultation.
	As regards method of sale, I note that the consultation document states in paragraph 26 that the,
	"MoD is likely to retain initially a significant financial stake in NewDERA, as a means to ensure that taxpayers receive full value for their investment in past government funded research".
	That seems to me eminently sensible. The document continues:
	"Retention of such a stake would not be a long term position".
	If this is a jewel in the crown, a national asset, and if it is to be highly successful in the private sector, as it may well be, why do not the Government retain a minority stake in it? I believe that Sir John Chisholm referred to a golden share in a communication to the staff, although I believe that it is referred to in the document as a special share. I am sure that that provision will be debated further.
	This is the second consultation paper that has been produced on the proposal that we are discussing. I leave the Minister with the questions that I have posed, although many more will be forthcoming. I look forward to hearing the Minister say that the primary stakeholders, apart from the Government-- I am sure that the Minister is capable of looking after the Government' interests--namely, the shareholders of the defence industries and the staff will be given the assurances that I seek either tonight or in the course of the next 30 days.

Baroness Sharp of Guildford: My Lords, I echo the thanks of other speakers to the noble Lord, Lord Hogg of Cumbernauld, for initiating this timely debate on this important topic.
	In the mid-1980s I was a joint author with colleagues at the Science Policy Research Unit of a brief article which appeared in a Lloyds Bank review and which suggested that Britain devoted too many resources to defence research and that defence research pre-empted scarce scientific resources which might otherwise go to the civilian sector. At that time defence research accounted for more than 50 per cent--that total was rising--of the total amount that the then government spent on research and development. Civilian R&D funded by the government of that time had fallen to 48 per cent of the total amount and that percentage was falling. There was considerable concern that Britain was not pulling its weight in the new technologies such as electronics and telecommunications, where it ought to pull its weight.
	I believe that the criticism that I and some of my colleagues made at that time had an impact on the debate that occurred. Of course today things have changed considerably. MoD's funding of research has halved in real terms and is now down to 38 per cent of the amount that the Government spend on supporting research and development. In areas such as mobile telephony and the Internet, civilian research has more than caught up with military research and indeed has overtaken it in many respects.
	But, as we recognised in the mid-1980s, these are also areas where civilian technology was rooted in military technology. If it had not been for the long years of public investment in these areas--not, by any means, entirely in the UK but around the world, particularly in the United States--there are many benefits which we would not be securing today.
	In the meantime, defence establishments have been totally reorganised under the able leadership of Sir John Chisholm and are now integrated into the next-steps agency, DERA, which is the subject of today's debate. DERA, which was established in 1995, has proved itself to be both an effective and a significant player, not only in terms of the purchaser/provider split in the provision of military R&D, but also increasingly in the commercial area, where it is beginning to pull its weight. The question we are debating today is: where next with DERA? Is privatisation or part-privatisation the best way forward?
	The case for privatisation is quite strong: it puts R&D at arm's length from the Ministry of Defence; it enables DERA to get the full benefits of being a commercially-based organisation; it gives it full flexibility in relation to recruitment of staff and payment of salaries out of the Civil Service net, which many regard as being a difficult net in which to work; it enables the organisation to go outside the public sector to raise the resources necessary to back up its vital investment potential; and, above all, it enables Her Majesty's Government to cash in on their equity, as it is estimated that privatisation would raise between £1 billion and £1.5 billion for the Exchequer--although I, like others, wonder why the Exchequer needs this extra money at a time when it is already sitting on a good £17 billion.
	The downside of privatisation, about which we have heard a fair amount already, is that the Ministry of Defence needs expert and impartial advice. It needs it even more so with the Smart Procurement initiative. Wholesale privatisation of DERA will separate the customer from the contractor very nicely, but the danger is that it could leave the Ministry of Defence devoid of the expert advice on purchasing that it needs. As we all know, a poor purchaser gets poor value for money--arguably, a lack of knowledge in purchasing has already plagued the Ministry of Defence--and it is vitally important that DERA's resources are available to help in such purchasing.
	Secondly, there are areas in which security issues demand in-house expertise rather than out-of-house expertise, and where control over knowledge is important--for example, in the biological warfare and germ warfare areas. There are also other important areas, such as intelligence gathering. It is vital that such knowledge should be in-house rather than out-of-house. The great danger with privatising DERA and pushing it down that route is that the knowledge is not there when the Ministry needs it in-house.
	Thirdly--again, this has been raised already by other speakers--there is the whole question of collaboration with the United States. Collaboration is vitally important. We know now that technology transfer takes place through people talking together--not through passing bits of paper, not through blueprints, not through publications but through people being able to talk together. Collaboration is vital to the effective passing of knowledge.
	As far as I can see, the Americans have made it quite clear that they are not prepared to collaborate fully with the United Kingdom if it is a matter of collaborating with a largely private sector organisation. They are worried that there will be leakage, not only in a military strategic sense but also in a commercial strategic sense--and, after all, DERA does have close links with BAe systems.
	So what have we come up with? It seems to me that we have come up with a typical British compromise. We have basically split the organisation down the middle. The high security parts associated with biological warfare and Porton Down remain in the public sector; the key information gatherer, the Defence Research Information Centre, is to remain within the public sector; the strategic analysts--the key people in strategic analysis in the Centre for Defence Analysis--who are the backbone of this US collaboration system, are also to remain within the public sector. Approximately 3,000 DERA staff are to remain within the public sector and the remaining 9,000 are to go the route of the public partnership privatisation.
	Perhaps the Minister can answer this question today: is this a viable option? Can we cut off what is, in many senses, the head of the organisation? Can we cut off the defence information and the big databases, the analysis of which is absolutely essential to the strategic function of the organisation? Can we cut off the strategic analysts, who are a key part of this organisation? Will it leave the organisation viable if we cut off its head--or will it go on running around like a chicken?
	We are rather sceptical on these Benches. Our view is that the exercise is driven not by defence needs or defence priorities but, once again, by the Treasury and its desire to cut defence expenditure. By hiving off to the private sector the capital costs of providing defence R&D, the Treasury is saving money in the short term as well as bringing into the Exchequer kitty the nest-egg of privatisation.
	But there are real questions to be asked about whether the private sector is prepared to fund the kind of long-term research and development that DERA undertakes. The British private sector is not well known for funding research and development even when it has a three-year pay-off, let alone a 15 or 20-year pay-off, which is the case with defence R&D. Is it really likely to support such R&D? I know we have had the dot.com revolution, but that seems to have got a bit pricked these days. Will the private sector be anxious to buy out DERA? Can we be confident that it will go on investing in DERA as we need to?
	DERA is a very significant resource for Britain in terms of research and development. We do not have many research and development resources; are we really wise to sell DERA off to the private sector when the private sector's record is so appalling?
	Secondly, will the Ministry be able to keep in-house the expertise it needs to be a Smart purchaser? Is there not a danger that scientists who are no longer working on day-to-day experimentation on the bench will rapidly get out of date and out of touch with leading edge developments? Again, all experience shows that keeping in touch through day-to-day experimentation enables scientists to keep their edge. The last thing we want is a whole lot of deadwood scientists sitting in the Ministry advising--perhaps badly--on purchasing. We question whether they will be able to keep their hand in.
	Thirdly, do not the same arguments apply to those parts of DERA which are set aside for collaboration? If such people are not doing active research on the bench, will they be able to keep their knowledge at a leading edge? And, vice versa, will those parts which remain in the new organisation--which I believe is to be called the "New DERA"--be viable without the leadership that the strategic analysts have given them and without access to the data resources which have been an important source of DERA's research?
	On these Benches, we have come to the decision that this hybrid, this part privatisation, poses many dangers and many risks. In moving along this route, we believe that there is a real danger of the Government killing the goose that has been laying some golden eggs for them. We believe that it risks leaving the Ministry devoid of top quality, honest and independent advice; that it risks killing the Smart Procurement initiative in its tracks; and that it is driven not by any rational argument for optimising the defence research function but by the Government's obsession with public expenditure headline figures.
	DERA has moved a very long way towards opening up its research resources for the benefit of the nation. Dual-use technologies--commercial off-the-shelf technology systems--have brought many changes to DERA's working methods over the last decade. We believe that there is a strong case for leaving the organisation as it is within the public sector and investing in it as a public sector resource. However, this would require investment by the Government for the longer term. It is that investment, whatever the likely benefits, that this Government, like their predecessor, seem incapable of providing. Sadly, we believe that this decision yields yet another example of Britain's endemic short-termism.

Lord Burnham: My Lords, the timing of the noble Lord, Lord Hogg of Cumbernauld, is immaculate in that having originally asked this Unstarred Question a month ago, he has now asked it again on the day when the Government have made an announcement on their plans for the future of DERA. I am sure that all noble Lords have read the consultation paper. As a result, the noble Lord's Question has taken on a rather different aspect. The Government have produced marvellous timing. They made the announcement on a day when technology stocks have taken a hammering. On this day, of all days, it may be considered that possibly selling DERA into the private sector is not a good thing.
	The postponement of the debate on the noble Lord's Question was made for entirely understandable and acceptable reasons. It is not acceptable that the Government should choose this occasion and this debate to make a statement of such importance. In another place it has been done by means of a Question for Written Answer which is even worse. My honourable friend the shadow Secretary of State in another place is understandably less than happy about the way in which that House has been treated. Your Lordships have the advantage of the noble Lord's debate. But it is not good enough, and it must be considered that the strong suspicion is that the Government are trying to sweep this sale under the carpet. The announcement has been downgraded from a proposal that has been talked about in many areas to a consultation document. There is strong reason to believe that this has been done at the instigation of the Government of the United States. Thank goodness that they have done so.
	In proposing a public/private partnership, Her Majesty's Government have resuscitated the remark of the late Lord Stockton that has been universally misquoted as selling the family silver. It is interesting that that speech should have been made about nationalisation. To quote this remark is better than to suggest a similarity with the other man who received 30 pieces of silver this week many years ago. At least he received all of it and did not have to hand 70 per cent of it back to the Treasury.
	It is shameful that the defence budget should be in such a state that major considerations of security should be affected by the need to balance the books with the £250 million which the Minister will receive as a result of the sale of DERA. That £250 million is 1.5 per cent of the defence budget. Sadly, it is true that the need to satisfy the Treasury is seen by the Ministry of Defence and the Armed Forces as a whole as more important and urgent than hanging on to get DERA right.
	There seems to be a serious and fundamental difference of opinion between the MoD, including the Secretary of State on the one hand, and two groups of Treasury officials on the other about the defence budget. One group is against defence expenditure per se, in support of so-called "socially valuable" expenditure. The other believes that the MoD is uncontrollably wasteful and that only constraints on budgets will do anything to remedy this.
	When DERA was founded it was recognised that national security was of paramount importance and that to put DERA in the private sector would risk government to government security relations, particularly with the US. Since its prime function lies in the realm of independent evaluation and testing, the possibility of privatisation brought a suspicion that its impartiality would be compromised.
	This Government have never clarified their position. What is the answer on the planned issue for intellectual property rights, or the financial structure and the legality under European legislation of the special purpose corporate vehicle? What does the proposed sale involve? Some DERA establishments, such as Porton Down and Malvern, are highly sensitive. The Government have only said in their proposals that they may be kept in the public sector, a point admittedly covered in paragraph 6 of the consultation document.
	Can the noble Baroness the Minister give an assurance that the delay in the decision on Heavy Lift and on BVRAAM is not being affected by the proposed sale of DERA?
	At present the MoD is both the owner and the main customer of DERA. As the main source of independent advice and evaluation to the MoD, it is essential that it continues to be regarded as wholly impartial both by the industries with which it deals and by foreign governments. There is a close relationship with the American defence industry. It is unlikely that the Government of the United States would be as willing to share their secrets with a commercial organisation. This is not new. In the past, difficulties have been experienced with US industry where the US Government do not own the IPR rights. The French Government, too, will not deal with private foreign organisations.
	It seems that it is US pressure that has forced the downgrading of the PPP proposal to a consultation document. Undoubtedly, the US will pull some of the work if DERA is privatised. I ask the Minister if she will be going to America next month to discuss this particular problem?
	It is hard to overstate the deterioration in the relationship between DERA and British industry that will follow privatisation. Already the limited amount of commercial work being undertaken has damaged the relationship between DERA and industry. The National Audit Office report states:
	"Our unique position of trust and impartiality has been damaged".
	It goes on to state that industry now realises that DERA is to be trusted and not regarded as a competitor. But would it continue to do so if DERA were privatised?
	Why have things been going wrong and why, in some areas of the MoD, are there pressures for a degree of privatisation?
	First, there is a management problem. Too many senior managers now regard themselves as superior consultants--very profitable, too--and have left their departments largely unmanaged. Without doubt, senior staff will benefit substantially from flotation on the market. What role will Sir John Chisholm play in the new organisation? Will he be in any way constrained from relationships with other commercial organisations.
	Secondly, there is understandable frustration in the MoD about delays in getting solutions out of DERA. There are too many cases where DERA has endlessly sought perfection where the needs of defence would have been much more quickly and almost equally efficiently satisfied by buying equipment off the shelf. It would not have been perfect but it would have been in service. Ministry officials have said that now is the moment to stop; they need the kit. But in so doing they have entirely destroyed the basis on which research and evaluation are carried out. It may seem strange for the Conservative Party to attack privatisation but in this case privatisation will destroy the relationship between the Ministry of Defence and the defence industry. The Labour chairman of the Commons Select Committee summed it up best in his reported comments:
	"Only the British would be stupid enough to sell their sensitive military research, possibly to a foreign company".
	The timing of the decision, not only in terms of what has been going on today on the Stock Exchange, is also extraordinary. Sir Keith O'Nions is newly in post as chief scientist. When he was interviewed by the Select Committee he made it clear that he needed time to decide how defence science should be conducted. As a loyal servant of the Government, he will no doubt accept today's announcement, but it cannot make him happy. Can the noble Baroness give an assurance that he will be fully involved in all the details of the change of ownership, management and the conduct of affairs? The same applies to Sir Jeremy Blackham's board which would seem to be undermined by current events. The work of the board was clearly set out in the SDR. Now the Government are going across what they said then.
	Even this Government have realised that some parts of DERA are too sensitive to be included in the sale, such as Porton Down and Malvern. What about Boscombe Down? Do the Americans control that? The Government must think again if there is not to be the most disastrous debacle in the history of defence procurement. I have not even touched, and will not touch, on the loss of jobs.
	With no disrespect to noble Lords who have taken part in the debate, the Benches are empty where, had the nature of the debate been known earlier, other noble and noble and gallant Lords might well have played a part. I hope that the Minister can give an assurance that both in your Lordships' House and in another place we may have the opportunity of debating the matter more fully.

Baroness Symons of Vernham Dean: My Lords, I am grateful for the opportunity offered by the Question of my noble friend Lord Hogg of Cumbernauld to debate the future of the Defence Evaluation and Research Agency and to hear, for the most part, the valuable contributions made by those present today. I should like to thank my noble friend for initiating the debate and everyone who has participated in it. I am also pleased that so many noble Lords who have spoken recognise what a valuable asset we have in DERA and what an important part it can play in the new economy, provided we can give it the right opportunities.
	Like the noble Lord, Lord Brett, I was interested and not entirely pleased to see the coverage of the issue in the weekend press. I understand that there were no official briefings to the press on this issue over the weekend, but of course staff were told on Friday to expect briefings today. It is entirely right and proper, as the noble Lord pointed out, that staff are given as much notice as possible, and we wanted to be as open as possible. It is one of the elements of such openness that journalists draw their own conclusions. After all, a great deal has been put into the public arena on this issue, so it is not entirely surprising that some of the journalists' conclusions have been accurate about what the Government's conclusions were likely to be. That is not particularly remarkable.
	To answer some of the points raised by the noble Lord, Lord Burnham, the Question of my noble friend Lord Hogg was postponed because I asked him to postpone it as I was away. This is an issue with which I have dealt and which falls particularly within my ministerial remit. My noble friend was kind enough to postpone his Question. There has been no sweeping of anything under any carpets. The Question was answered today by Written Answer in another place. It was referred to during defence Questions which took place today in another place. A consultation document is before your Lordships and everyone else. I assure noble Lords that all contributions will be welcome.
	Perhaps I may say to the noble Lord that I also deal with the issue of Heavy Lift and BVRAAM. The two decisions--those decisions and this one--are entirely free-standing. They are in no way connected. I give the noble Lord that assurance as the Minister who deals with both. Perhaps I may say to him with regard to another point he raised that Sir Keith O'Nions and Sir Jeremy Blackham both sit on the working group which I convened to consider the future of DERA. The recommendations of that working group were unanimous. They were unanimous not because one went round the table and some people disagreed and then I asked for a unanimous recommendation. They were genuinely unanimous.
	We have been working on a way forward for DERA for the past two-and-a-half years. One of the reasons it has taken this long is the complexity of the subject and the number of interested parties. Often the stakeholders we have consulted have had very specific and quite different views and interests. In the face of such complexity it was important that we fully explored the key issues. We were determined to get this as right as we could in order to ensure a successful future for DERA.
	I shall try to explain to my noble friend Lord Hogg of Cumbernauld, and perhaps as importantly, given some of the things he said, to the noble Lord, Lord Burnham, why we believe that DERA needs to move on from the structure that has underpinned the successes of the past five years. DERA's core business from the Ministry of Defence, about half of which is research, has declined significantly over the past 10 years, a point made by my noble friend Lord Faulkner of Worcester. That is not because we do not rate the value of the science and technology that DERA produces; far from it. It is largely because our procurement process has moved away from buying individual commercial components and integrating them with home-grown equipment developed in DERA laboratories. Instead, we require our prime contractors in industry to be responsible for providing us with fully-integrated systems. This reduces the risk of delay and ever-increasing costs by placing the burden of risk on industry to get it right first time. That lies at the very heart of our Smart Procurement Initiative.
	In addition, as the noble Baroness, Lady Sharp of Guildford, told us, the balance of research for defence is changing. The civil sector now leads in many areas of technology which are also relevant to defence needs. For example, the work the civil sector is doing in biotechnology, communications and computing has a significant impact on military requirements and doctrine. If we do not find ways for defence to take advantage of this work as early as possible in the development cycle, our Armed Forces are bound to be the losers. The way to address the impact of this decline in DERA funding is not to call for its reversal. If I may say so, the point made by the noble Lord, Lord Burnham, was very short sighted because it ignores the changing environment in which we operate. The answer is to find a way of allowing DERA to become fully involved in the wider science and technology base. That is not only good for DERA; it is good for the MoD because it ensures that DERA can bring a wider expertise to meeting the requirements of the Armed Forces. It is also good for the UK as a whole as it allows DERA to exploit the treasure trove of knowledge and ideas that it possesses to the benefit of a wider market than its traditional defence customers. In this way DERA will be able to make a growing contribution to the country's economy. I assure the noble Baroness, Lady Sharp, that those are the genuine reasons why we announced in the Strategic Defence Review that we would take advantage of the opportunities offered by a public/private partnership approach for the future of DERA.
	Initially, as my noble friend Lord Faulkner said, we believed that it would be possible to place the bulk of DERA in the private sector, operating as a plc but constrained to ensure that the UK and our international partners' security interests were properly protected. Following extensive and entirely genuine consultation on this proposal last summer, it became apparent that this was not the best approach. Strong concerns were expressed by a number of stakeholders, not least the UK's own industry and our international allies. These concerns focused on the need to retain in the public sector specific activities concerned with the integration of world-wide science and technology knowledge, the provision of an in-house source of impartial advice and responsibility for the integration and management of the research programme and international research collaboration.
	Following last year's consultation, we looked at two possible ways of dealing with the problems identified during our initial consultation process. The first involved setting up virtually the whole of DERA as a plc but selling only a minority share in the organisation. The second involved an approach which would see about three-quarters of DERA's staff forming a company which would transfer to the private sector, with a core group of staff retained within the MoD for strategic reasons.
	We concluded that the first approach simply would not work because it failed to address adequately concerns over sensitive and high-level policy and competition-sensitive work being carried out in the private sector. We have, therefore, concentrated on finding a solution that would allow us to retain the most sensitive areas of activity within government so that the remainder of DERA could be placed in the private sector in a way that enabled it to provide to the MoD all research relevant to defence needs and ensured it a future as a prosperous, growing force for the national economic good.
	That does not mean that we have not been very conscious of the concerns that have been raised by our decision to pursue this option. Indeed, many of those concerns have been voiced by your Lordships during the debate. I also understand why DERA's own staff were worried that, if we split the organisation in two, we might destroy something that has become a real success--as most noble Lords have been kind enough to acknowledge--over the past 10 years, and indeed a genuine asset of which the Government are justifiably proud.
	What we have done, therefore, is to devise a way of preserving within government the resources necessary to carry out the most sensitive functions and to provide the MoD with impartial high-level advice, while at the same time leaving within DERA the capability to maintain the full range of current activities--from laboratory-based research and testing through to providing carefully packaged advice to customers in the MoD and elsewhere. That important point was raised by the noble Baroness, Lady Sharp of Guildford.
	I now turn to the points raised by my noble friend Lord Hogg of Cumbernauld and the noble Lord, Lord Burnham, about reaction from the United States. A great deal has been said about the reaction of our United States allies, much of it not particularly accurate. Some people believe that we are taking too much notice of the views of the United States; others believe that we are not taking enough notice. I was a little concerned as to which the noble Lord was most worried about: whether I was taking too much notice of the United States or whether I was not taking enough notice.

Lord Burnham: My Lords, I thank the noble Baroness for giving way. I do not see how she could have thought I was suggesting that we were taking too much notice.

Baroness Symons of Vernham Dean: My Lords, I thought that the noble Lord indicated towards the end of his address that possibly we had bowed too much to what the United States was saying. I assure the noble Lord, if he is worried--as his honourable friend in another place expressed himself to be worried in a Radio 4 interview this morning--I have talked face to face with United States politicians and officials on this issue. The noble Lord, Lord Burnham, asked me when I should be going to the United States to do so. I have already been to the United States specifically for that purpose. I have also discussed the issue with our friends and colleagues in Australia, who also had some concerns about the original reliance option.
	The United States faces much the same challenges as we do. It is certainly not standing in the way of a PPP for DERA. We have listened to the comments of the United States on this issue, just as we have listened to the comments of our other allies. We have listened to the comments of UK industry, and of DERA, and of MoD staff. Not only have we listened; we have taken them into account in putting forward these revised proposals--a genuine revision of proposals in the light of consultation. I am confident that the "core competence" approach will be welcomed by the majority as the best way forward.
	Let me now say something about the core competence model in detail. It is our preferred model. We detailed it today in a consultation document under the title, Core Competence. It would lead to a clear separation of the two parts of DERA. The element to be retained in the MoD would include the chemical and biological defence sector at Porton Down and a majority of the Centre for Defence Analysis, as well as a number of teams and individuals involved in either sensitive projects or top-level systems research. Final decisions have not been made yet, but we would expect the number of staff within the retained elements to be fewer than 3,000.
	The elements retained in the MoD would, therefore, provide a high-level overview across the whole spectrum of science and technology currently addressed by DERA. That would ensure that the MoD has an impartial source of advice and system research capability to provide high-level assessment, integration and management of its research programme and international research collaboration. This capability would be focused on those activities that must be carried out within government.
	The remainder of DERA, which noble Lords will see referred to as "New DERA" in the consultation document, would consist of about 9,000 staff. It would continue to be a major supplier of science and technology to the MoD but essentially with the freedom to develop its business for a wider range of customers in the defence and civil areas.
	This approach would create two vibrant, sustainable organisations. The new company would have the freedom to flourish, to grow its business and to diversify the wealth of knowledge it has built up over the years, to the benefit of the wider UK economy, while still providing the MoD with the essential services that we shall continue to need long into the future. Indeed, we should expect this organisation to become a globally branded technology company. I do not share the pessimism of the noble Baroness, Lady Sharp, on that issue. We already have an indicator of just how successful it might become in the success of the recent joint venture between DERA and NXT to exploit speech recognition technology. The retained organisation will be a small but also, importantly--I stress this--a world-class organisation offering rewarding careers within the MoD and the wider Civil Service.
	The delivery of this vision is dependent to some extent on how DERA is placed in the private sector. The most sensitive activities are to be retained in the MoD. That will allow us to minimise the constraints under which DERA can operate. That will, in turn, create an environment that permits full exploitation of its potential.
	We envisage the process beginning with DERA's incorporation as a plc. This could be followed fairly swiftly by a flotation, as soon as DERA has reached a suitable stage of development. This could be as soon as 2001. All of this would take place under the leadership of its current chief executive, Sir John Chisholm. I should like to take this opportunity to pay tribute to Sir John--the man who formed the DERA that we know today against all the advice of those who thought it was impossible. Sir John has constructed an agency that has produced real efficiencies and benefits. I am very pleased that he is to lead the new DERA.
	It is likely that the MoD would retain initially a significant financial stake in DERA. This would ensure that the taxpayer received a share of what we believe will be the increasing value of the new company as it builds upon and exploits its impressive legacy of government-funded research. In answer to the question raised by my noble friend Lord Brett, the decision as to when the MoD will dispose of its stake in the business will depend on market conditions and the speed with which the company establishes itself as a commercial organisation. It is a little early for us to anticipate that yet.
	Obviously, detailed work would be needed to refine the implementation of the core competence model and to decide how the MoD-retained elements in DERA will operate. We are now embarking on a six-week period of consultation to determine the views of our stakeholders. We shall not take any final decisions until we have heard those views. My noble friend Lord Brett raised a number of points which I shall endeavour to deal with. I assure my noble friend that this is a genuine consultation exercise. It will come as no surprise to many noble Lords who know our histories that my noble friend and I share something of a common past in our trade union affiliations. I am clear that such a period of genuine consultation is enormously important.
	A number of noble Lords, including my noble friend Lord Brett and the noble Lord, Lord Hogg of Cumbernauld, were concerned about job losses. Over the next few years there must be adjustments in both the retained element and the new company as they adapt to changing demands, and that will probably have employment implications. However, that is not new. My noble friend Lord Brett is aware that this has occurred, and is occurring now, in DERA as the balance shifts from the more traditional defence technologies to the new information technologies. Therefore, the issue is before us in any event.
	My noble friend also asked about pensions. In this process it is important to safeguard the terms and conditions of employment of those who transfer from the public to the private sector. That will be achieved by structuring the PPP to ensure the transfer of undertakings. In that context my noble friend and I are familiar with TUPE, which will apply in this case.
	My noble friend also asked about the position of military officers. I remind him that we already have arrangements under which military staff work within private sector companies such as BAe Systems. We are confident that similar secondment arrangements can be put in place as far as concerns DERA.
	My noble friend Lord Faulkner went into a good deal of detail. I was pleased to hear of his highly successful visit to Malvern. A number of DERA's sectors have staff based on the site at Malvern. As we have not yet completed the detailed breakdown of staff between the retained DERA and the new company, it is not possible to be definitive about the splitting of the Malvern staff between the two organisations. We expect that division to be refined during consultations. As I have indicated to my noble friend Lord Brett, that will be genuine consultation. My noble friend Lord Brett and the noble Lord, Lord Burnham, were concerned about intellectual property rights. Those rights are owned by the MoD and we foresee that they will pass to the new company, with reserved rights for defence use.
	I hope your Lordships agree that what I have set out tonight are the results of genuine consultation on an imaginative and potentially highly successful way forward for DERA. We have listened carefully to all commentators and stakeholders, and the proof of that is in the revised documents that are before your Lordships. We believe that what we now propose meets the concerns of those who felt that some of DERA's activities were simply too sensitive for the private sector and, at the same time, offer the opportunity for us to create a world-class company that is able to exploit technology in partnership with civil industry and, consequently, to invest not only in people but in facilities and science to the wider benefit of wealth creation in the United Kingdom.

House adjourned at eight minutes before nine o'clock.